The US enters a government shutdown after the Senate blocked funding

The Dow Jones Index (US30) ended Tuesday up 0.18%. The S&P 500 Index (US500) gained 0.41%. The technology-heavy Nasdaq Index (US100) closed 0.30% higher. The US stocks closed slightly up on Tuesday, suggesting that investors are shrugging off concerns about a potential government closure.

The US government work stoppage began on Wednesday after the Senate rejected a short-term spending measure, forcing agencies to suspend all but the most essential operations. This move threatens to disrupt air travel, federal services, and the release of key economic data, including the monthly unemployment report. The White House Office of Management and Budget issued a memo confirming that the government would indeed shut down, blaming Democrats for the impasse. Previous shutdowns have cost the US billions of dollars in lost productivity, with federal employees facing unpaid leave or delayed paychecks. 

Analysts say the stalemate reflects deep partisan divisions over spending priorities, with no clear way out yet, causing concern for investors and global markets watching the world’s largest economy. Investors also remain cautious amid a slowing labor market, weak consumer confidence, and high stock valuations. The number of job openings in the US increased by 19,000 to 7.227 million in August 2025, compared to an upwardly revised 7.208 million in July, matching market expectations.

The Mexican peso strengthened to 18.3 per US dollar, nearing its strongest level since July 2024 – the 18.29 mark recorded on September 16. Last week, the Bank of Mexico cut its key interest rate by 25 basis points (bps) to 7.50% and termed the move calibrated and conditional, stressing data-dependence and gradual easing, which reassured investors: inflationary risks remain under watch and policy will not sharply change. Mexico’s unemployment rate rose to 2.9% in August, indicating a moderate slowdown but not a deep deterioration.

European equity markets grew solidly on Tuesday. The German DAX (DE40) climbed 0.57%, the French CAC 40 (FR40) closed 0.19% higher, the Spanish IBEX35 (ES35) gained 1.04%, and the UK’s FTSE 100 (UK100) closed up 0.54%. Overnight, the US government was due to shut down, with President Trump threatening massive public sector job cuts amid existing labor market pressure, which led to a worldwide decline in yields in the third quarter. The ECB, by contrast, is set to hold rates until the year-end, as fresh CPI data from Germany, France, and Spain point towards increasing inflation.

On Wednesday, the price of silver climbed above $47 per ounce, hitting a new 14-year high, as the US government shutdown fueled demand for the precious metal as a safe haven after lawmakers failed to reach a temporary funding agreement. The closure will furlough hundreds of thousands of federal employees and halt key services, and traders are now focused on its duration, as a prolonged shutdown could delay the release of critical economic data ahead of the Federal Reserve’s meeting in late October, including Friday’s Nonfarm Payrolls data. The broader adoption of solar energy has further boosted the metal’s appeal, alongside growing demand from consumer electronics and data center manufacturers.

Asian markets traded mixed yesterday. Japan’s Nikkei 225 (JP225) fell by 0.25%, China’s FTSE China A50 (CHA50) declined 0.31% and went on holiday until the end of the week, Hong Kong’s Hang Seng (HK50) gained 0.87%, and Australia’s ASX 200 (AU200) closed down 0.16%.

The Reserve Bank of India (RBI), as expected, left the key repo rate unchanged at 5.50% at its October 2025 meeting. This decision came amid moderating inflation, though concerns intensified after the US introduced 50% tariffs on Indian exports and increased visa fees, sparking fears of broader punitive measures against the services sector. On the economic outlook, the RBI revised its GDP growth expectations for the 2025/26 fiscal year upward to 6.8% from a previous 6.5% projection. Concurrently, projections for headline inflation were lowered from 3.1% to 2.6%.

Indonesia’s annual inflation rate accelerated to 2.65% in September 2025, up from 2.31% in August. This was the highest inflation rate since May 2024, but it remained within the Central Bank’s target range of 1.5% to 3.5%. Core inflation, which excludes regulated and volatile food prices, slightly accelerated to 2.19% in September from August’s 11-month low of 2.17%. On a monthly basis, the Consumer Price Index (CPI) rose by 0.21%.