How a U.S. government shutdown could impact global markets
2025-10-01 13:19:39
Morning Light strikes the American Capitol hours before a press conference to discuss the transparency bill in Epstein files, which directs the issuance of the remaining files related to investigations at Jeffrey Epstein and Ghislaine Maxwell, at Capitol Hill in Washington, DC, USA, September 3, 2025.
Jonathan Ernest Reuters
The US government entered a closure on Wednesday, which sparked a conversation across global markets, where investors were weighing the potential impact on the wider economy.
Although government closure usually have a little effect on capital markets, this timing is important.
American job data scheduled for Friday It will be late Through this step – install expectations for the federal reserve just weeks before its next meeting. President Donald Trump Also threaten To use the closure for the age of “a lot” of discounts in jobs in the public sector.
With no clear path towards a deal, it is also unclear how long the dilemma will remain closed to federal offices. During the first period of Trump in his post, a partial operation was stopped – The longest in history.
The average market changes on the last closure
| The closure period | Full days | Closure | S & P 500 ( %) pure change | Vix net change points | Change the DXY net | A 10 -year net change |
|---|---|---|---|---|---|---|
| 12/22/18-1/25/19 | 35 | partial | 6 | 8- | -2 | 17 |
| 1/20/18-1/22/18 | 3 | partial | 2 | 4 | -2 | 15 |
| 1/1/13-10/17/13 | 16 | Filled | 3 | -1 | -2 | -14 |
| 12/16/95-1/6/96 | 21 | Filled | -3 | 4 | 0 | 1 |
| 11/14/95-11/19/95 | 5 | Filled | 3 | -1 | 1 | -10 |
| 5/5/90-10/9/90 | 3 | partial | -5 | 3 | -3 | 2 |
| middle | 1 | 0 | -1 | -4 |
source: Bank of America
The origins of the risk to us They were fragile on Wednesday. Gold – which is usually seen as a safe asset in times of economic or geopolitical turmoil – His thirty -ninth record this year. European stocks rose In the last morning trade, he gained momentum after open open, and The shares listed in Asia have been mixed At Wednesday session. Meanwhile, the global government bonds were cooled after a return on the bonds issued by the European government higher in early trade. However, the US Treasury’s return in the United States for 10 years traded 4 lower basis points after a sudden decrease in private salary statements.
Investors may consider another place amid “defect”
The closure adds to concerns about American institutional credibility, financial position and “job defect”, according to Luke Bartholomeo, Vice President of Economists in Aberdeen.
“I am surprised by the amount of political capital that the Trump administration seems to be ready to spend on reform, if I can put it in this way, the Federal Reserve, which affects the Federal Reserve,” said Squawk Box Europe at CNBC on Wednesday.
He added, “The federal reserve is in the end the basis for global capital markets. So, the long period of time is under pressure, and I expect this issue to continue,” but he indicated that “he will be surprised if this market does not ignore this in the end.”
Nile Pearl, chief investment official at Miton Miton in the United Kingdom, said the prolonged closure is likely to weaken morale in global markets.
“With the interrogation of bond markets with extremist government borrowing requirements, credit differences were narrow and stock markets near the heights with unforgettable assessments, it is not surprising that we see investors moving to the assets of safe haven when a negative event comes like the US government closing to the city. “
“Investors have been satisfied with the risks we face, and negative surprises will cause a reaction. Any form of diversification seems attractive, including other minerals such as silver, encryption, and possibly other commodities as well.”
FX effect
Joe Prussuelaas, the chief economist in RSM US, pointed out that the largest result of the markets can be more pressure on Greenback or an impact on the decision of the FBI in October.
“For the largest part of the US government closure, it tends to lead to a modest attack of speculative behavior by global investors about prices and currencies. This edition of US financial foolishness does not differ.”
“In order for there to have a greater impact on global markets, you will need to close the United States government throughout the month that is close to closing the 2018-2019 record. In the event of this, this is likely to affect the decision of the Federal Reserve Policy at the end of the month, which is likely to affect global bloc flows, interest rates and foreign exchange values.”
Proswellias pointed out that the mass shooting of federal workers “is likely to lead to a further decrease in the value of the dollar, which leads to capital flows to euro and yen“
The dollar index
Prussuelaas told CNBC to CNBC that workers’ watered on a large scale can have a harmful effect on the European industry.
“The demand for European exports like cars will decrease significantly, which will add to the pressure that German industrialists feel,” he said.
Investors must “look at the close fears”
However, in a memo on Tuesday, analysts at Swiss Investment Bank UBS said they had not seen the closure as a major event of risks, although he admitted that it was not a welcome development for global investors.
They explained: “The coverage was only an impact on the silent market.” “The previous government closure has caused modest and short -term fluctuations in stock and bond markets because investors realize that the economic impact is also very modest and short -term … Treasury auctions and payments do not continue naturally, and although public subscription activity and some organizational operations may stop, we do not believe that it does not represent a meaningful threat in the market.”
UBS has also argued that any temporary data delays are unlikely to throw a federal reserve mitigation course.
“The closure would suspend the collection and issue of most government economic data,” they said. “This will also affect the previous employment data reviews, which have gained more importance in recent times … This means that the Federal Reserve can go to the October Policy decision without taking advantage of the updated labor market data, but we do not see this preventing it from following up by reducing the average of 25 bott.”
Capital market pricing by an overwhelming majority at the 25 Passis points to the main interest rate of October 29, according to it Fedwatch tool for CME.
“We advise investors to search for closure fears in the past and focus on other market drivers, such as a mixture of continuous discounts in the Federal Reserve rate, strong companies’ profits, and strong and enthusiastic AI Capex,” the UBS team added in its memo on Wednesday.
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