Global markets entered the week on a cautiously optimistic note, with equities edging higher and the softening, even as investors remain fixated on political brinkmanship in Washington. The prospect of a US government shutdown looms large, threatening to disrupt not only economic momentum but also the clarity of policy signals at a time when labor data could prove pivotal.
US equity futures reflected measured confidence in early European trading, with contracts tied to the and both up 0.4%, and gaining 0.5%. The upbeat tone extended to Europe, where the added 0.3% and London’s advanced 0.4%.
In Asia, sentiment diverged: Tokyo’s slipped 0.7% as ex-dividend trading weighed on blue chips, while Hong Kong’s surged nearly 2% and Shanghai’s Composite rose 0.9%, suggesting renewed domestic buying interest. South Korea’s ended higher after three straight losing sessions.
This modest global rally is taking place against a backdrop of heightened policy uncertainty. President Trump is scheduled to meet lawmakers in a bid to avoid a funding lapse, even as he stokes controversy with a weekend post depicting the firing of Fed Chair Jerome Powell.
Markets, already uneasy about the Fed’s tightening path, now face the added dimension of potential political interference with central bank independence. The (DXY) slipped 0.2% to 97.94, a reflection of both softer yields and growing investor unease with U.S. governance risks.
Bond markets underscored that caution. The eased to 4.15%, down over 3 basis points in late Asian trade, as traders positioned ahead of a critical week for jobs data. Beyond Friday’s report—which the Wall Street Journal consensus pegs at a modest 45,000 job gain—markets will digest , , and figures.
A government shutdown could delay or distort these releases, leaving the Fed flying partially blind in its data-dependent approach.
Commodities delivered a split signal. weakened on signs of supply relief, with sliding 1.1% to $68.45 and WTI dropping 1.2% to $64.91. Reports that OPEC+ may lift output, coupled with the resumption of Kurdish exports through Turkey, have revived concerns of a looming glut.
prices in Europe also eased, with the TTF benchmark down 1.4% to €32.25 per megawatt hour, reflecting both seasonal demand softness and improved storage buffers. In contrast, powered to fresh record highs above $3,844 an ounce, buoyed by the weaker US dollar and lingering safe-haven demand. extended its rally on ongoing supply worries, signaling that industrial metals remain sensitive to bottlenecks despite slowing global growth.
For investors, the interplay between politics and policy now represents the central risk. An extended shutdown would not only dampen fiscal support but also inject fresh volatility into the Fed’s already complex policy calculus. At the same time, Trump’s rhetoric toward Powell could intensify fears about institutional independence—an issue with implications far beyond the U.S. bond market, as credibility is a cornerstone of monetary stability.
The bullish case rests on resolution: if lawmakers avert a shutdown and labor data confirms a soft but steady jobs market, equities could sustain their upward momentum while yields stabilize. Conversely, prolonged dysfunction in Washington risks undermining confidence in US assets, reinforcing gold’s safe-haven appeal, and reviving concerns about the dollar’s role as the global reserve anchor.
Energy’s retreat offers short-term relief to inflation, but oversupply could also weigh on oil-linked equities and exporters.
In short, this week is less about headline market moves and more about what lies beneath: credibility, continuity, and confidence. Investors would do well to track not just payroll numbers, but also the broader political narrative that may determine whether U.S. policy remains predictable—or drifts into uncharted territory.