US Government Shutdown Spurs Gold Surge as Nike Shines

Political Gridlock Pressures Markets While Safe-Haven Assets Rally

Markets were jolted on Wednesday following a partial shutdown of the US government, sending investors fleeing to safe havens like gold, while a strong earnings report from Nike provided a glimmer of hope amid growing uncertainty.

US Government Shutdown: Political Deadlock Returns

The US federal government ground to a halt after a last-minute spending bill, backed by Republicans, failed to pass the Senate due to Democrat opposition. This marks the 15th shutdown since 1981 and the second under Donald Trump’s presidency.

• Over 150,000 federal employees are leaving due to buyouts.
• Up to 750,000 workers could be furloughed, costing an estimated $400 million per day.
• Key services like scientific research, air travel, and military pay are expected to be disrupted.
• The shutdown may also delay the crucial September non-farm payrolls report.

Investor Outlook

Historically, Wall Street has often weathered shutdowns with resilience. However, given the scale of this shutdown and tensions over budget priorities, this episode could pose a more sustained threat to confidence and market stability.

Stock Market Futures Slide

Major US stock futures declined sharply on Wednesday in response to the shutdown:

• S&P 500 futures dropped by 0.8%.
• Nasdaq 100 futures fell 0.6%.
• Dow Jones futures also slid 0.6%.

Despite a strong performance in September (S&P 500 gained 7.8% for Q3), concerns over slowing job growth and federal job cuts now dominate investor sentiment.

Markets await data from the ADP private payroll report later today, which may be the final labour market indicator available for a while if the shutdown persists.

Nike Reports Strong Q1 Earnings

Sportswear giant Nike exceeded expectations with its latest quarterly results, helping to partially offset broader market gloom:

• Quarterly revenue and profit surpassed forecasts, especially in North America and wholesale channels.
• Shares climbed over 3% in after-hours trading.
• CEO Elliott Hill highlighted “Win Now” strategies as key drivers of performance.

However, the company warned that tariff-related costs have surged to an estimated $1.5 billion for the year, up from previous guidance of $1 billion, due to production in tariff-hit countries like Vietnam.

Gold Hits New Record High

Amid the uncertainty, gold surged to fresh record levels as investors sought safety:

• Spot gold hit $2,875.53/oz.
• Gold futures soared to $3,903.45/oz.

Other precious metals also benefited:

• Platinum and silver reached 12- and 14-year highs respectively.

With political risk and economic doubt mounting, gold and other safe havens are expected to retain investor interest in the short term.

Oil Prices Steady After Two-Day Drop

While equity markets struggled, oil prices steadied:

• Brent crude edged up 0.4% to $66.29 a barrel.
• WTI crude gained 3% to $62.58 a barrel.

This followed sharp declines earlier in the week, amid concerns over economic slowdown and reports that OPEC+ could increase production by up to 500,000 barrels per day in November.

What This Means for Investors

• Short-Term Risks: Political instability is driving volatility. Safe havens like gold are gaining ground while risk assets face pressure.
• Stock Picking Opportunities: Nike’s strong quarter suggests individual stocks with resilient business models may outperform.
• Economic Data Delays: With key reports like payrolls potentially postponed, market direction may be harder to gauge in the coming weeks.

Investors may want to brace for continued choppiness in markets, monitor Fed policy signals closely, and consider balancing risk assets with exposure to precious metals or defensive sectors.

Sources: (Investing.com, Reuters.com)