Stocks mixed, gold hits record as US government shuts down

By Stella Qiu and Samuel Indyk

LONDON (Reuters) -Wall Street futures fell, gold struck a record high and the dollar eased on Wednesday as the U.S. government shut down much of its operations, possibly delaying the release of crucial jobs data that could muddy the interest rate outlook.

With no clear path out of the impasse over a funding deal, agencies warned the government shutdown would halt the release of a closely watched September employment report and lead to the furlough of 750,000 federal workers at a daily cost of $400 million.

S&P 500 futures and Nasdaq futures dropped about 0.6% each on Wednesday. Gold prices climbed to $3,895 an ounce, hitting a record high for a third straight session.

European shares were mostly higher, with the pan-continental STOXX 600 up 0.4%. Britain's FTSE 100 and Switzerland's SMI outperformed, boosted by healthcare stocks which jumped on expectations they could avoid excessive U.S. import tariffs after President Donald Trump struck a deal with Pfizer on prescription drug prices. 

SHUTDOWN TO DELAY DATA

With Friday’s nonfarm payrolls report expected to be absent, investors may place greater weight on the ADP National Employment Report due later today. Forecasts are centred on a modest gain of 50,000 private-sector jobs.

"The shutdown ought not to have any major effect on markets," said Lars Skovgaard, senior investment strategist at Danske Bank.

"I wouldn't rule out that it can add some jitters but you shouldn't be worried about it. We're not," Skovgaard added. 

Futures now imply a 95% chance of a rate cut from the Federal Reserve in October, up from 90% from a day earlier, with around a 75% probability of another move in December.

Anthony Saglimbene, chief market strategist at Ameriprise, said in a note that if the shutdown lingers, September inflation reports in mid-October could also be negatively affected.

"An extended period where the U.S. Bureau of Labor Statistics is not operating at full strength could affect data collection efforts for other reports, which may impact the quality of the data," he said.

On Wednesday, Japan's Nikkei dropped 0.9%, after an 11% surge the previous quarter. South Korean shares rose 0.9%, adding to the 11.5% gain in the last quarter, after data showed its exports rose at the fastest pace in 14 months in September.

Taiwan's shares gained 0.6%. The island's top tariff negotiator said on Wednesday that Taiwan will not agree to a deal with Washington for half of all semiconductor production to take place in the U.S.

Chinese markets, including Hong Kong, were closed for a public holiday.

DOLLAR FALLS

In foreign exchange markets, the dollar index slipped for a fourth straight day and was last down 0.2% to 97.59.

The euro rose 0.2% to $1.1756, while sterling was up 0.2% at $1.3474.  

The dollar was off 0.6% at 147.06 yen, after a Bank of Japan survey showed confidence among big Japanese manufacturers improved for a second quarter, heightening the chance of an interest rate hike as soon as this month.

In the Treasuries market, yields were steady in European morning trade. The benchmark U.S. 10-year Treasury yield was flat at 4.156%, having risen 1 basis point the day before.

Oil prices were steady after two consecutive days of losses as investors weighed potential OPEC+ plans for a larger output hike next month against the prospect of shrinking inventories in the U.S.

U.S. crude was down about 0.1% at $62.28 a barrel, while Brent was 0.1% lower at $65.94.

(Reporting by Samuel Indyk, Stella Qiu and Ankur Banerjee; Editing by Sam Holmes)