Japanese Nikkei slips

David Morrison

SENIOR MARKET ANALYST

01 Oct 2025

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Trade across Asian Pacific markets was subdued overnight with China closed for the first day of its Golden Week holiday. Japan’s Nikkei fell 0.9%, marking a fourth consecutive day of losses. Despite this, the Nikkei remains within sight of the record high hit in the middle of last month.

The Bank of Japan’s Tankan Manufacturing survey showed a slight improvement in business sentiment amongst large manufacturers when compared to the previous quarter. Australia’s ASX 200 closed effectively unchanged.

Meanwhile, India’s central bank kept interest rates steady at 5.5%, in line with forecasts. This helped to lift the Nifty 50 by 0.7%. While trade was mixed across the region, there was a cautious tone as investors considered the wider effects of a US government shutdown, should it turn out to be a prolonged closure.

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US stock index futures drop

US stock index futures were sharply lower in early trade this morning. The sell-off was the initial response from investors to news of the US government shutdown, which began at 12:01 EST. This came as Republicans and Democrats failed to agree on a temporary spending bill to keep funding going.

There have been previous shutdowns, and typically these have had little effect on financial markets. But much depends on how long the shutdown lasts. Given the current intransigence on both sides, there’s a possibility that federal services could be curtailed for some time.

Government data collection and statistical services have already been affected, and it’s looking increasingly like Friday’s Non-Farm Payroll update will be postponed. Given the recent volatility in this data series and the extreme revisions to prior releases, this will make life more difficult for economists and traders alike.

US Bureau of Labor Statistics (BLS) Commissioner Erika McEntarfer was fired by President Trump at the beginning of August following the release of a disappointing July jobs report and significant downward revisions to earlier numbers.

President Trump criticised the data release as being "rigged" against him despite providing no substantiating evidence for these claims. August’s data came in even weaker, despite the president appointing a Trump loyalist as the new commissioner.

The immediate effect of the shutdown is that around 750,000 federal employees will be furloughed, according to the Congressional Budget Office. But in contrast to other halts, this time, President Trump has warned that it could lead to permanent job losses. This puts additional emphasis on other labour market statistics due out this week.

Yesterday’s JOLTS Job Openings was broadly positive, although it did highlight a slowdown in hiring.  All eyes will now be on today’s ADP Payroll number and tomorrow’s weekly Unemployment Claims update. This is particularly important given that the Federal Reserve has highlighted its concerns over signs of a weakening labour market.

The big question is if the Fed will be prepared to cut rates again at the end of this month, should they lack a key update on unemployment. The probability of a 25-basis point cut eased back slightly but remains above 90%.

Yesterday, US stock indices wrapped up the day, month, and quarter on a positive note with modest gains across the major indexes. For the third quarter, the S&P 500 gained around 8%, the Nasdaq advanced 9%, and the Dow added 5%. After-hours action saw Nike climb 4% on an earnings beat that surprised to the upside.

Source: TN Trader

Mixed start for Europe

European stock indices had a mixed start on Wednesday. But they began to pick up as the morning session progressed. The UK’s FTSE 100 pushed to a fresh all-time high, while European markets traded within sight of their own record levels.

Source: TN Trader

There was a slight uptick in Manufacturing PMIs across the Eurozone, while the UK’s PMI was flat, coming in at a fresh five-month low. Yet all remain below the 50 mark, indicating continued contraction across the sector.

Meanwhile, the Eurozone’s Core CPI Flash Estimate came in as expected at +2.3% year-on-year, unchanged from the prior reading. Headline CPI ticked up to 2.2%, above the previous reading, which was revised down a touch to 2.0%.

The US dollar falls again

In the Forex market, the US dollar sold off overnight as the federal shutdown came into effect. The Dollar Index was on track for its fourth consecutive negative session, having hit a one-month high last Thursday. But the dollar began to recover as the session progressed, and the Dollar Index has managed to hold above the key 97.00 level so far.

The Japanese yen was the major beneficiary of dollar weakness. The USD/JPY was retesting the bottom of a band of support, which reaches down to 146.70 or so. But it was unclear if the yen’s recent strength was part of a larger safe-haven trade, or more of a function of interest rate differentials. The latter could be coming into play as the Bank of Japan is widely expected to raise rates at its next meeting towards the end of October.

Source: TN Trader

Precious metals rebound

In early trade yesterday, gold surged to a fresh record intra-day high of $3,870. But it proceeded to pull back sharply, falling below $3,800 in a matter of hours. It looked as if this was an early warning that traders were cutting their exposure in a move which could trigger a deeper pullback. This was given credence as gold’s daily MACD was hovering at overbought levels. But the dollar’s retreat, along with concerns over the US government shutdown, saw buyers emerge to buy the dip.

Gold had recovered most of its earlier losses by yesterday’s close. And it pushed on to hit yet another record this morning, coming within $5 of $3,900. The daily MACD is looking even more overbought now. But shorter timeframes suggest that there still may be some room to the upside.

Source: TN Trader

If Congress can reach some accommodation quickly and reopen federal agencies, then it’s possible gold will sell off again. But prices could find additional support should the shutdown show signs of continuing past the weekend.

Once again, it’s proved to be a similar tale for silver. Having broken above $47 per ounce early yesterday, silver pulled back sharply. But it too recovered later in the session, and it has pushed higher again this morning to trade at a fresh fourteen and a half year high.

It is tantalisingly close to taking out its record high, just below $50 from April 2011. The big question for traders, though, is, has it got enough upside momentum to do this from current levels? Or will it have to pull back first and give its daily MACD an opportunity to reset?

Source: TN Trader

Oil under pressure

Crude oil prices came under renewed selling pressure this morning. Sentiment has been weighed down by the prospect that OPEC+ will announce additional output hikes at its meeting this weekend. This added to news that additional supply is coming after Iraq and the Kurdistan region agreed to reopen a pipeline running through Turkey, which should allow around 200,000 barrels per day of crude to flow through for export.

Put together, this additional supply countered concerns that Russian exports have been seriously affected by repeated attacks by Ukraine on its energy infrastructure. Traders also shifted their focus to today’s US inventory report from the Energy Information Administration. This is expected to show a build of around 1.5 million barrels of crude, following the 0.6 million drawdown reported last week.

However, uncertainty lingers after the American Petroleum Institute (API) announced last night a sharp draw of 3.7 million barrels. Front-month WTI is now testing a significant level of support around $62-$61.70.

Source: TN Trader

Natural gas rallies

Natural gas prices have moved sharply higher over the past eight days, adding around 15% since last Tuesday. This marks a shift from the recent downward tone, helping to establish a more stable base.

The latest move away from lows indicates that the market may be rebalancing, though traders remain cautious about whether the strength can be sustained. It would not be a surprise to see gas prices pull back a touch, given recent strength.

Cryptos consolidate

In the crypto space, Bitcoin has put in a decent recovery since the weekend. Support held around $110,000, and it is now testing an area of resistance at $117,000. A break above here would be the first significant step for Bitcoin to launch a rally towards August’s all-time high, just shy of $125,000. It’s a similar story for Ether, which broke back above $4,000 over the weekend. It is worth noting that in both cases, the daily MACDs are curling up from recent lows.

Volatility creeps higher

The VIX ticked up at the beginning of the week but has pulled back a touch this morning. This is despite overnight weakness in S&P 500 futures, which would usually go together with an uptick in volatility. This could be because traders expect the US government shutdown to end quickly, as it has in the past. But given the antipathy between Republicans and Democrats this time round, that could be wishful thinking.

The subdued reading indicates that investors are not aggressively seeking protection against volatility in the near term. Markets appear to be maintaining a sense of calm, even with the backdrop of political and economic uncertainty.

Market outlook

US futures were lower early on Wednesday as the government shutdown set the tone. While history shows shutdowns have not derailed markets, the risk this time lies in delayed data releases and the broader economic backdrop.

Gold and silver remain in focus as beneficiaries of political uncertainty, while the dollar may face further pressure if the shutdown persists. Investors will be watching PMI prints and the ADP jobs data closely, particularly with Friday’s nonfarm payrolls already cancelled.


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