Market report: Expect further market jitters from lingering shutdown
Emma Wall, chief investment Sstrategist, Hargreaves Lansdown: “The market wasn’t short of health warnings last week with US banking giant Jamie Dimon, CEO of JPMorgan calling auto-credit concerns ‘cockroaches’, gold hitting another all-time high of above $4,300, Presidents Trump and Xi spatting in a renewed war of trade threats and the US shutdown rumbling on. Stock markets are very good at looking through short-term noise, but volatility last week shows concerns that current headwinds are longer lasting. The shutdown means that the market is short of meaningful economic data too, and so tweets, threats and comments take on greater impact.
Investors should expect more of the same this week. The US government shutdown is now in day 19 – some weeks off the 35-day record under Trump’s previous administration – but data shows the longer the shutdown lasts, the worse it is for equities and the US dollar. Republicans and Democrats are struggling to find resolution over healthcare funding and further talks are due to take place in Washington this week.
China and the US are also due to continue talks this week, resolving the latest 100% tariff threat. China has this morning posted third quarter growth figures of 4.8%, exceeding market expectations of 4.7%, but shy of the official target of 5%. Retail sales dragged on GDP showing domestic weakness, but industrial output boomed, outpacing estimates at 6.5% last month. This will strengthen China’s position against the US as trade talks continue this week – China is experiencing record exports despite Trump’s tariff policy.
This is also the week that China will consider its new five-year plan, announced next March and expected to be focused on the nation’s dominance in the economic drivers of the future such as rare earths, where they own 60% of global mines and 90% of global processing. AI and chip production will likely also be a focus.
The gold price cooled on Friday, but gold bugs are bullish on the precious metal. The gold price has been driven higher by global central bank purchasing, as countries diversify away from the US dollar as a treasury store, but also by concerns about the US economy. While the GDP figure looks robust, job weakness remains and reports of a two-tier recovery in the banking sector are worrying. While the large banks have been able to benefit from higher rates, smaller regional banks are less cushioned from defaults and bad loans. HSBC forecast gold to hit $5,000 in 2026, and while that mark seems punchy the macroeconomic drivers are certainly in place to support an elevated price – especially if there is a stock market correction. Investors should not ignore the canary in the coalmine, with gold at these levels it is signalling a warning that all is not well in global markets.”