US Shutdown: No Data? No Problem.

For the week ending 3 October 2025

As of midday Friday, global equities were trading in record territory as markets shrugged off the US government shutdown. The yield on the US 10-year Treasury note declined seven basis points to 4.10% from last Friday, while the price of a barrel of West Texas Intermediate crude oil slumped $5 to $60.85 amid an OPEC+ output increase. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), dipped to 17.7 from 18.25 a week ago. 

MACRO NEWS

Markets take US government shutdown in stride

Nonessential US government services have been suspended since Wednesday, October 1 as the US fiscal year came to an end without the passage of an appropriations bill. Prior to recessing, the US House of Representatives did pass a bill extending funding for 45 days at fiscal year 2025 levels, but the bill has thus far failed to receive the 60 votes necessary in the Senate. Three Democratic senators have broken with their caucus to vote to extend, while one Republican voted against it, resulting in a 55-45 stalemate. The White House has sought to make the shutdown as painful as possible for Democratic constituencies, withholding funding for green energy and infrastructure projects in Democratic-led states. The administration is also threatening to permanently fire thousands of government workers. Democratic leaders continue to push for increased health care funding in exchange for voting to reopen the government; however, Republicans say they are open to negotiations on health care subsidies only once the shutdown has ended. So far, markets have taken the shutdown in stride, with equities trading at record levels and bond yields dropping modestly.

SEC to allow dual share class funds

The US Securities and Exchange Commission on Monday signaled its intent to grant Dimensional Fund Advisors the ability to offer ETFs as share classes of its mutual funds. Dozens of other asset managers have applied for the same exemptive relief. ETF versions of existing funds are expected to be more tax efficient.

Increased focus on private US economic data

With US government data delayed by the shutdown, the market paid increased attention to the ADP private employment report on Wednesday. The report showed that private employment in the US declined 32,000 in September. However, it should be noted that this drop can be largely attributed to a rebenchmarking by ADP based on recent revisions to government employment data. Further, monthly ADP data and nonfarm payrolls aren’t typically closely correlated. 

QUICK HITS

Activity in the US, particularly in the services sector, downshifted in September, though most countries actually saw a services uptick.

President Trump announced a 100% tariff on foreign-produced films, though the logistics of enforcement remain unclear. This would be the first tariff on a service rather than on goods. 

After a rapid start to 2025, the British economy grew 0.3% in the second quarter, down from 0.7% in Q1, the Office of National Statistics reported Tuesday.

European Central Bank President Christine Lagarde said the bank’s policy outlook isn’t fixed and the ECB can act if needed. So far, adverse economic impacts from tariffs have been mainly on growth, though she noted that the trade deal with the US lowered uncertainty “faster than expected.” She added that ECB policy is well placed to respond to any inflation risks.

US job openings held steady in August, rising to 7,227,000 from 7,208,000 in July, suggesting the US labor market remains balanced amid low levels of churn.

Despite apparently US labor market stasis, consumer confidence continues to erode, data from the Conference Board showed this week. Its confidence index fell to 94.2 in September from 97.8 in August, with respondents growing more concerned about a lack of job availability.

In a speech at the annual Labour Party conference in Liverpool, British Prime Minister Keir Starmer said that the fiscal rules meant to restore the budget to health were non-negotiable and rejected calls from members of his party for unfunded tax cuts and spending.

The White House withdrew the nomination of economist E.J. Antoni to head the Bureau of Labor Statistics on Tuesday. Antoni faced a difficult confirmation process, as several Republican senators were reportedly skeptical of his qualifications.

US Trade Representative Jamieson Greer this week called the 55% US tariff on Chinese imports “a good status quo.”

Taiwan has rejected a proposal from US Commerce Secretary Howard Lutnick to produce 50% of its semiconductors in the US. Cheng Li-chiun, Taiwan’s top trade negotiator, said the proposal was not discussed during recent negotiations in Washington.

The European Union is planning to boost tariffs on steel imports in an effort to help local producers cope with the impact of Asian overcapacity. To safeguard its steel industry, the EU currently has a temporary mechanism in place that imposes a 25% tariff on most imports once quotas are exhausted. This mechanism expires next year, and the commission has been working to replace it with a more permanent instrument, which it reportedly plans to unveil next week.

The inflation rate in the eurozone rose to 2.2% in September from 2% in August. The core rate held at 2.3%.

On Friday, President Trump issued an ultimatum to Hamas to accept the terms of a peace agreement with Israel, in cooperation with neighboring countries, by 6 PM Washington time on Sunday, October 5, “or all hell will break loose.”

Italy’s draft budget shows its budget deficit declining to the EU’s 3% limit this year, a pace that is faster than expected. Spreads between 10-year Italian bond yields and those of Germany are currently close to 80 basis points, less than one third of the level when Italian Prime Minister Giorgia Meloni took office in 2022.

The US Supreme Court will hear oral arguments on President Trump’s firing of Fed Governor Lisa Cook in January, allowing Cook to remain on the board as the process plays out.

Amid slumping farm prices, President Trump said he will push Chinese President Xi Jinping to increase his country’s purchases of US soybeans. On Thursday, US Treasury Secretary Scott Bessent said he sees a “big breakthrough” ahead in US trade talks with China.

After announcing an agreement with Pfizer to lower the price of certain  medications in the US, President Trump said he will delay implementing pharma tariffs while negotiations with other drugmakers continue.

According to Yonhap News Agency, South Korea and the US have reached a preliminary agreement on security, as both countries continue to negotiate trade and tariff issues.

President Trump on Thursday floated the idea of issuing “dividend” payments to Americans of $1,000 or $2,000 from tariff proceeds.

The unemployment rate in Japan rose to 2.6% from 2.3% in August, its highest level in over a year.

Canadian Prime Minister Mark Carney will meet with President Trump in Washington next Tuesday.

THE WEEK AHEAD

Monday: Eurozone retail sales

Tuesday: US New York Fed inflation expectations survey

Wednesday: US FOMC minutes

Thursday: N/a

Friday:  Japan PPI, Canadian employment, US University of Michigan sentiment survey

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.