Yuen Long Breakfast: Government shutdown crisis triggers market volatility, gold approaches 4200, and oil prices plummet significantly

Market Focus: Policy Uncertainty Looms Over Global Financial Markets

The US federal government shutdown crisis has temporarily subsided, as the House of Representatives passed a bill to end the shutdown, which will be submitted for Trump’s signature. However, full normal operations may take several days, and some agencies might not resume until next week. More challenging is the possibility that the October CPI and non-farm employment reports may never be published, leaving the Federal Reserve in a “blind flight” during a critical decision-making period.

White House Press Secretary Levin admitted that the government shutdown has caused lasting damage to data collection capabilities. National Economic Council Director Hassett expects the shutdown to drag Q4 GDP growth down to between 1.5% and 2%, with annual economic growth around 2%. This policy uncertainty has triggered a reassessment of the Federal Reserve’s future policy path.

Commodity Markets: Gold Surges, Oil Under Pressure

Under risk-averse sentiment, gold performed remarkably, rising 1.65%, approaching $4,200/oz, marking four consecutive days of gains, indicating cautious investor attitude towards risk assets.

The oil market faces greater pressure. OPEC’s latest monthly report changed earlier expectations, indicating a global oil surplus by 2026, with Q3 supply shortages turning into oversupply. As a result, WTI crude oil plummeted 4.19% to $58.48 per barrel, briefly breaking the $60 mark. OPEC forecasts global oil demand growth at 1.3 million barrels per day this year, reaching 105 million barrels/day next year, and 106.5 million barrels/day the following year, but oversupply expectations remain the main pressure on oil prices.

Bond and Forex Markets: Rate Outlook Shifts, Yen Continues to Depreciate

Market bets on continued rate cuts by the Fed in December have intensified, with the 10-year US Treasury yield falling 6 basis points to 4.06%. However, recent signals from Fed officials suggest increasing caution regarding rate cuts. Boston Fed President Collins stated that the threshold for further rate cuts “is relatively high” unless the labor market significantly deteriorates, and rates should remain at current levels for some time. Philadelphia Fed President Bostic prefers to keep rates unchanged until there is “clear evidence” that inflation has returned to the 2% target.

NY Fed President Williams further indicated that the Fed will soon need to expand its balance sheet again, and once reserve levels are sufficient, it will begin gradually purchasing assets to maintain reserve levels.

In the forex market, USD/JPY rose 0.43%, reaching a high of 155.0. Japanese Finance Minister Shunichi Suzuki issued a verbal warning again, stating that unilateral and rapid yen fluctuations have become a political burden, exacerbating imported inflation. However, Goldman Sachs and Bank of America believe that immediate intervention by Japanese authorities is unlikely unless the yen depreciates to 161-162, which could increase intervention probability. The US dollar index rose 0.01% to 99.47, and EUR/USD increased 0.09%.

Stock Market Performance: Dow Leads, Tech Stocks Adjust, Industrial Stocks Rebound

The US stock market’s three major indices showed divergence. The Dow continued its strong rally, rising 0.68% to a new all-time high, reflecting investor optimism that the government shutdown will soon end. The S&P 500 rose slightly by 0.06%, while the Nasdaq declined 0.26%, as investors pulled out of high-valuation tech stocks and shifted to other sectors. The China Golden Dragon Index fell 1.46%.

In individual stocks, Goldman Sachs, JPMorgan Chase, and American Express all hit new highs. Nvidia rose 0.3%, AMD, with its forecast of accelerated revenue growth over the next five years, surged up to 9%. Foundry chipmaker GlobalFoundries outperformed expectations but fell 1.8%. Tech giants Alphabet dropped 1.6%, Meta declined 2.9%, reflecting market re-pricing of high-valuation tech stocks.

The Bank of Canada’s October meeting minutes leaked signals that the rate-cutting cycle may have ended. Governor Macklem stated that the current policy rate of 2.25% is appropriate, balancing US tariff impacts and keeping inflation near 2%. The committee unanimously agreed that the stimulative effect of this rate is nearing its limit.

Global Stock and Commodity Overview

European stocks rose across the board, with Germany’s DAX 30 up 1.22%, France’s CAC 40 up 1.04%, and the UK’s FTSE 100 up 0.12%. In Hong Kong, the Hang Seng Index futures closed at 26,899 points, down 24 points from yesterday’s close; the China Stock Index futures closed at 9,528 points, down 11 points.

Cryptocurrency markets experienced a correction, with Bitcoin down 1.34% in 24 hours, at $101,753; Ethereum declined 0.07%, at $3,415.8.

Technology and Corporate Developments: AI Investment Continues to Accelerate

OpenAI upgraded the ChatGPT series, launching two new models: GPT-5.1 Instant and GPT-5.1 Thinking, initially available to paid users. The new models feature optimized tone and response speed; Instant version defaults to warmer conversational tone, while Thinking version offers greater durability for complex tasks. Additionally, the company added customization options such as Professional, Candid, and Quirky, allowing users to tailor robot styles more flexibly.

Meta announced an investment of over $1 billion in Wisconsin to build an AI data center, expected to be operational by 2027, creating about 100 full-time jobs. The company also invested $200 million to support energy infrastructure, collaborating with Alliant Energy on transmission line and network upgrades, demonstrating tech giants’ commitment to expanding AI computing power.

Delta Air Lines CEO admitted that forced flight reductions have caused significant financial impacts. The airline canceled over 2,000 flights during this period, with bookings down 5-10%, and had to refund some passengers. The CEO expects that if the government shutdown ends this week, the airline industry could recover during the Thanksgiving holiday, but losses this quarter are already irrecoverable.

Today’s Key Event Calendar

Australia releases October seasonally adjusted unemployment rate; UK publishes Q3 GDP, September manufacturing output monthly rate, industrial production monthly rate, and seasonally adjusted goods trade balance; IEA releases monthly crude oil market report; Eurozone releases September industrial output monthly rate; US releases initial jobless claims for the week ending November 8 and EIA crude oil inventories for the week ending November 7; Fed’s Mester speaks on monetary policy, Harker participates in a fireside chat.