Market Report.
📉 Markets are betting there’s a 70% chance there’ll be a shutdown on Wednesday. Historically, government shutdowns have had little economic impact, but this time could be different due to President Trump’s threat to make some federal furloughs permanent.
👥 The labor market is already in a precarious state for federal employees, especially in the Washington D.C. region where many federal employees reside, following earlier layoffs advocated by Elon Musk’s Government Efficiency advisory board. A prolonged shutdown could also delay the release of key economic data from the Bureau of Labor Statistics, including the monthly jobs report and the consumer price index, which could impact the Federal Reserve’s policymaking.
💰 The impact should be relatively mild, but the potential hit to furloughed federal employees and contractors could significantly set back their financial stability.
🗣️ Vice President JD Vance stated “I think we’re headed to a shutdown because the Democrats won’t do the right thing,” while Democrats said the two sides remain far apart on the issues. Democrats are demanding that any stopgap funding bill include an extension of enhanced Obamacare tax credits set to expire at the end of the year, but Republicans want a “clean” resolution without those provisions.
⚖️ Dueling short-term funding bills to avert a shutdown have already failed in the Senate, where Republicans hold a slim majority and 60 votes are needed to overcome the filibuster.
📈 According with Bloomberg, data centers are proliferating in Virginia, and the energy-hungry facilities are driving up electricity costs in nearby areas, including Baltimore, which is over an hour’s drive away.
⚡ The power needs of massive data center complexes are rapidly driving up electricity bills for households and businesses, adding to the rising costs of other essentials like food and housing. The AI boom is creating a “reliability crisis” as data centers’ growing power demands strain electricity grids, with forecasts showing data centers could account for 9% of total US electricity demand by 2035.
🏠 Residents in areas like Baltimore are seeing their utility bills jump by 50% or more, forcing difficult choices between paying for electricity or other necessities like rent. Tech companies like Amazon, Microsoft, and Google are major drivers of the data center expansion, spending over $200 billion on capital expenditures in 2024.
🔋 The Rolls-Royce company, which we highlighted weeks ago in our reports for its development of micro nuclear reactors for data centers in the US, could now also collaborate with Boeing in the development of new engines for their upcoming aircraft according to the Wall Street Journal.
🌍 Very interesting reflections shared in a CNBC interview on the investment situation in Europe: Nicolas Dufourcq, the head of France’s state investment bank Bpifrance, warned that Europe is becoming “doubly colonized” by Chinese industry and U.S. tech companies. Dufourcq said the consequences of this are being felt now, not just in the future, as Europe is unable to fund its own future-critical industries. Dufourcq admitted that state intervention alone is insufficient to counter the trend of European capital flowing to the U.S. and China.
📈 The Bpifrance chief called for raising the “level of aggressivity” of capital allocation in Europe towards Europe’s own interests, rather than continuing to “invest in tourism, wine, real estate, and U.S. tech.”
🇨🇳 China factory activity shrinks: China’s official manufacturing purchasing managers’ index (PMI) rose to 49.8 in September, up from 49.4 in August, but remained below the 50-mark separating growth from contraction.
💼 The prolonged slump in manufacturing activity underlines the twin pressures on China’s economy – weak domestic demand and the impact of U.S. tariffs on Chinese factories and overseas firms. Policymakers have rolled out consumer loan subsidies and have signaled more monetary policy tools are available to support the economy, but they appear cautious about major stimulus measures.
🤝 Uncertainty remains over a potential U.S.-China trade deal, with negotiations still ongoing over technical details, including the fate of TikTok. China’s exports to regional rivals like India have hit record highs, but the U.S. market remains critical, accounting for around 14% of China’s total exports.
🇬🇧 In the UK, prices at British retailers rose at the fastest pace since February 2024, with overall shop prices 1.4% higher than a year earlier, up from 0.9% inflation in August. Food price growth remained high at 4.2%, while non-food prices declined by a smaller 0.1% annually, suggesting the decline in non-food prices is nearing an end.
📊 The Bank of England forecasts the broader consumer prices index will rise to 4% this month, double its target, as policymakers debate whether a slowing jobs market is enough to ensure inflation returns to target.
📰 Geopolitics:
🤝 Donald Trump and Israeli Prime Minister Benjamin Netanyahu have reportedly agreed on a 20-point plan aimed at ending the war in Gaza. However, the prospects for lasting peace remain uncertain, particularly in the absence of direct involvement from Hamas. This plan may provide a framework for negotiations, but its effectiveness will likely depend on the willingness of all parties, including Hamas, to engage in dialogue and compromise.
📞 Israeli Channel 12 reports that Prime Minister Benjamin Netanyahu called and apologized by phone to the Prime Minister of Qatar regarding the recent attack on Doha.
🇻🇪 According to the New York Times, Venezuelan opposition leaders are in discussions with the Trump Administration regarding the potential overthrow of President Nicolás Maduro. This initiative appears to be part of another “regime change” effort, led by figures such as Marco Rubio, CIA Director John Ratcliffe, and Stephen Miller, who have expressed support for the plan.
📈 Market View.
📉 Futures in the United States are experiencing uncertainty ahead of the potential government shutdown on Wednesday. S&P 500 futures have remained anchored around 6,715 points for the last few hours. Nasdaq 100 futures are doing the same, hovering around 24,850 points.
📉 The DXY dollar index continues to retrace from last Thursday’s levels following a spectacular rise; however, it appears to have some support around 97.80 points. This weakening has allowed EUR/USD to stay above 1.17, currently trading at 1.1740.
📈 European markets are improving, with DAX 40 futures reaching 24,000 points yesterday, surpassing the resistance level of 23,900 points that held throughout September. However, they have retraced and are currently at 23,890 points. Eurostoxx 50 futures have managed to stay above 5,500 points, reaching 5,548 points yesterday and currently trading at 5,527 points.
🛢️ Crude oil continues its price consolidation formed since August, experiencing a sharp retracement at the beginning of the week that has brought it back to around $66.70 per barrel for Brent. The price range for Brent crude has fluctuated between $69.30 and $65.15 since early August.
🪙 Gold futures continue to advance to new historical highs, practically day by day, currently reaching nearly $3,900 per ounce, with a clear target of $4,000 per ounce in sight.
📉 The bullish rebound in Bitcoin, which began on Sunday, has paused in recent hours around the $114,000 mark.
