All three major U.S. stock indexes gained ground in a broad rally driven by rate cut hopes and solid corporate earnings results

International News via Reuters:

Wall Street headed higher and gold resumed its ascent on Wednesday as earnings season hit its stride and dovish comments from U.S. Federal Reserve Chair Jerome Powell helped investors look past trade tensions between the United States and China.

All three major U.S. stock indexes gained ground in a broad rally driven by rate cut hopes and solid corporate earnings results, while crude prices rebounded and gold hit new heights as Washington and Beijing ramped up the rhetoric in their ongoing tariff dispute.

President Donald Trump said he was considering cutting some trade ties with Beijing in response to China not buying U.S. soybeans. This followed China’s ramped-up restrictions on crucial rare earth exports.

U.S. Trade Representative Jamieson Greer described those restrictions as a complete repudiation of U.S.-Chinese trade agreements over the past six months, while Treasury Secretary Scott Bessent said he does not believe Beijing wants to be an “agent of chaos.”

EARNINGS OVERSHADOW TRADE TENSIONS

“The escalation of trade tensions with China don’t seem to be getting the market as worried as you might expect,” said Thomas Martin, senior portfolio manager at GLOBALT in Atlanta.

“And in the meantime, so far, earnings are coming in OK with the financial companies reporting.”

Upbeat third-quarter results from Morgan Stanley and Bank of America lifted investor sentiment.

Those sentiments got a boost from Powell’s commentary on Tuesday, which provided assurances that the U.S. economy is on firm footing, but warned that the labor market remained weak, seeming to affirm the market’s near certainty that the central bank will cut interest rates at the conclusion of its October meeting.

Powell’s comments had “no surprises,” Martin said. “We’re still going to have some rate cuts. I don’t think (Powell’s remarks) were dovish or hawkish, but I think that by not being hawkish, they might be considered dovish.”

The Dow Jones Industrial Average rose 287.60 points, or 0.62%, to 46,556.15, the S&P 500 gained 65.66 points, or 0.99%, to 6,709.97 and the Nasdaq Composite rose 289.88 points, or 1.29%, to 22,811.34. 

European stocks rose as upbeat results from France’s LVMH sparked a rally in luxury goods, soothing worries that slowing global economic growth and ongoing tariff wars are dampening corporate health.

MSCI’s gauge of stocks across the globe  rose 11.21 points, or 1.15%, to 989.53.

The pan-European STOXX 600 index rose 0.62%, while Europe’s broad FTSEurofirst 300 index added 14.36 points, or 0.64%.

Emerging market stocks  rose 26.58 points, or 1.99%, to 1,365.56. MSCI’s broadest index of Asia-Pacific shares outside Japan closed higher by 2.04%,  to 708.93, while Japan’s Nikkei  rose 825.35 points, or 1.76%, to 47,672.67.

The dollar slipped against its peers as Powell’s comments boosted rate cut bets and a stronger risk appetite robbed the greenback of some of its luster.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.21% to 98.86, with the euro up 0.15% at $1.1622.

Against the Japanese yen, the dollar weakened 0.32% to 151.32.

U.S. Treasury yields softened as investors digested the latest development in the U.S.-China trade dispute.

The yield on benchmark U.S. 10-year notes fell 1.3 basis points to 4.009%, from 4.022% late on Tuesday.

The 30-year bond yield fell 2.6 basis points to 4.5977% from 4.624% late on Tuesday.

The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 0.6 basis points to 3.485%, from 3.479% late on Tuesday.

Oil prices advanced as investors weighed the International Energy Agency’s projected 2025 supply surplus against the ongoing trade dispute between the world’s two largest economies. 

U.S. crude rose 0.26% to $58.84 a barrel and Brent rose to $62.45 per barrel, up 0.1% on the day.

Gold extended its record run, breached the $4,200 per oz level for the first time as the safe haven metal continued to benefit from geopolitical tensions.

Spot gold rose 1.3% to $4,195.50 an ounce. U.S. gold futures rose 1.48% to $4,200.00 an ounce.

Reporting by Stephen Culp; Additional by Tom Wilson in London and Rae Wee in SingaporeEditing by Rod Nickel

What happens in America, in other words, doesn’t stay in America, and global officials say being left data-blind by the shutdown over time could complicate their own policymaking

International News via Reuters:

The U.S. government shutdown that has turned off the official flow of data could begin clouding the view for policymakers in Japan and other countries where insight into the fortunes of the world’s biggest economy informs the outlook for their own currencies, trade performance and inflation. 

What happens in America, in other words, doesn’t stay in America, and global officials say being left data-blind by the shutdown over time could complicate their own policymaking and boost the risk of a mistake at a moment when countries are already adjusting to the Trump administration’s efforts to remake global trade.

“It’s a serious problem. We hope this gets fixed soon,” Bank of Japan Governor Kazuo Ueda told a news briefing on October 3, as he discussed the hurdles the BOJ faces in deciding when to resume interest rate hikes.

One Japanese policymaker went further. 

“It’s a joke. (Federal Reserve Chair Jerome) Powell keeps on saying the Fed’s policy is data-dependent but there’s no data to depend upon,” said the official, who declined to be named as he was not authorized to speak publicly.

 Bank of England policy member Catherine Mann said the questions surrounding U.S. data, the controversy over the Fed’s independence, and other issues don’t figure as directly into BOE policy debate as the shifts in trade policy, for example, which directly affect things like prices and the export outlook.

But she noted how over time the British pound lost its central status in the world, a process that took decades and was driven by multiple forces she referred to as “termites” that weakened the pound’s role over time.

Policy changes that could degrade the dollar’s standing or erode the Fed’s independence, “are things that we have in our mind but they’re not front and center,” Mann said. But “they are the termites, as opposed to something that is imminent.”

Finance and economic leaders from around the world are gathered in Washington this week for meetings of the World Bank and the International Monetary Fund, and – in a world beset by an ongoing European land war, tensions and violence in the Middle East, and long-term issues like climate change – much of the meeting’s oxygen is likely to be consumed by discussion of U.S. President Donald Trump’s plans for the world, his performance in office so far, and, now, the sudden stop of official information about a $30 trillion economy that accounts for roughly one-fourth of world output. 

The shutdown could end at any time and the flow of data resume. But the episode is nonetheless symptomatic of a deeper set of issues around U.S. governance and data reliability, including Trump’s efforts to gain new influence over the Federal Reserve and his firing of the head of the Bureau of Labor Statistics because he was angry over a jobs report that the IMF cited among the “downside risks” facing the world right now.

“Intensification of political pressure on policy institutions…could erode hard-won public confidence in their ability to fulfill their mandates,” the World Economic Outlook published Tuesday by the IMF stated. “Pressures on technocratic institutions mandated with data collection and dissemination could also erode the public’s and markets’ trust in statistics from official sources, significantly complicating the tasks of central banks and policymakers in making policy decisions…It also raises the likelihood of policy mistakes if political interference leads to compromise in data quality, reliability, and timeliness.”

‘THE RISK OF ERROR RISES’

It is not as if all data has disappeared. The U.S. Federal Reserve, self-funded and not affected by the shutdown, continues to survey its extensive network of contacts about the economy, and private data services provide alternatives that policymakers have learned to knit into serviceable, if imperfect, substitutes at least for short-term analysis.

“The month-to-month data flow in the U.S. gets talked about but never is a decisive factor,” for other central banks, said Adam Posen, president of the Peterson Institute for International Economics and a former Bank of England policymaker. 

But Posen said that the shutdown itself and the tumult around BLS “contributes to the general skepticism about the governance of the U.S. and the reliability of the U.S….And that is important. It eventually feeds into reserve management and currency decisions and feeds into volatility outlooks for the U.S. that were not there before.”

If the spring IMF and World Bank meetings were all about the uncertainty posed by Trump’s plans for higher tariffs and rising protectionism, attention is now fixed on how companies, countries and consumers are coping with the new landscape.

Short answer: Not as bad as expected when Trump first took office, at least through September, but still adjusting, according to the IMF’s WEO update that found “a significant, though not massive, impact of shifting policies on the economic outlook.” After trimming its global growth outlook by a half percentage point in April to 2.8%,  the IMF in its latest projection published on Tuesday clawed most of that back, with global growth now seen at 3.2% for the year.

But now, with a major hole in the flow of data covering around a quarter of global economic output, the view will get foggier the longer the shutdown lasts.

“Certainly, there is still a great deal of information out there, and policymakers are dedicating substantial effort to gather micro data and anecdotal evidence,” about the U.S. said Robert Kahn, director of global macro at Eurasia Group. “But how best to put it together, and importantly how markets will react to such news, are critical unknowns. As time goes on, the risk of error rises as uncertainties compound.”

Reporting by Leika Kihara in Tokyo and Howard Schneider in Washington; Editing by Dan Burns and Andrea Ricci