Global Markets Surge as US Government Shutdown Nears Resolution

Global stock markets rallied on Monday, buoyed by optimism that a historic US government shutdown is close to resolution. London’s FTSE 100 index closed at a record 9787 points, surpassing its previous high set in October, while the FTSE 250 climbed by over 1 per cent. Leading the surge in London were mining group Fresnillo, whose shares rose more than 6 per cent, and drinks-maker Diageo, up 5.5 per cent following the appointment of Sir Dave Lewis as chief executive.

This renewed market confidence followed developments in Washington, where the US Senate advanced a bill to end the 40 day federal shutdown that had furloughed workers, postponed food assistance, and disrupted air travel. Eight Democrat senators joined their Republican colleagues to expedite a funding measure expected to re-open the government until late January. The prospects of a deal were welcomed by investors globally, with the odds of a resolution by the end of the month assessed at 98 per cent by the crypto betting site Polymarket.

US stocks also experienced considerable gains at the start of the trading week. The S and P 500 increased by 1.3 per cent, while the technology focused Nasdaq Composite rose 2 per cent, rebounding from last week’s losses amid concerns over artificial intelligence sector valuations. Notably, shares in tech giant Nvidia climbed nearly 5 per cent, with Amazon advancing over 3 per cent, marking a significant reversal after a period of volatility.

President Donald Trump acknowledged the effect of the prolonged shutdown on the equity markets. Over the weekend, he hinted at a 2000 dollar tariff dividend for American citizens, an apparent measure to stimulate economic activity in the wake of stalled federal operations. Analysts interpreted this as a signal of the president’s intent to prioritise economic growth and stability.

European and Asian markets reflected the prevailing optimism. South Korea’s Kospi index advanced by 3 per cent, the Nikkei in Tokyo rose 1.3 per cent, and Hong Kong’s Hang Seng gained 1.6 per cent. The Shanghai Composite in China added 0.5 per cent, supported further by data suggesting consumer prices had returned to positive territory. The Cac 40 in Paris and Germany’s Dax were both higher by over 1 per cent, with the continent-wide Stoxx 600 similarly strengthened by expectations of renewed US government activity.

Gold prices rose nearly 2 per cent, reaching above 4070 dollars an ounce, as traders positioned for a likely US Federal Reserve rate cut. Money markets indicated a 65 per cent probability of lower borrowing costs in the coming months due to economic headwinds. Concurrently, the British pound appreciated against the dollar on improved sentiment, while government bond yields edged upwards as investors returned to equities and riskier assets.

Private equity activity continued apace in London, with back office services specialist JTC agreeing to a 2.7 billion pound takeover by Permira, signalling robust interest in UK listed assets. Meanwhile, investors assessed the impact of potential changes to the UK dividend tax regime, as Chancellor Rachel Reeves prepared for her forthcoming Budget, aiming to tax investment income more equitably. Such policy adjustments are expected to affect both retail investors and pensioners reliant on dividend earnings.