Markets mixed following averted shutdown of US Congress

Global equities rose with U.S. futures, fixed income retreated and JPY weakened as a tentative deal by the U.S. Congress to avert a government shutdown overshadowed weaker economic data from China and the U.S. over the past few days. Per Republican and democratic aides, the U.S. House and Senate negotiators reached a tentative bipartisan agreement Sunday night on a $1.1 trillion bill to keep the government open through the end of September. The news triggered a swing in markets after equities and currencies’ traders had been loath to take additional risk ahead of a busy week for macro-economic events and data.

Japanese equities advanced to their highest level since March after their best week of the year. With Japan225 holding firm above 19300. JPY weakened for the fifth day out of six, comfortably holding above 111.50. Gold has retreated to 1260 following the retracement of US treasuries.

Oil is holding at its lowest level in a month trading just above 49.00 with high inventories dragging on markets that have been grappling with a global supply glut for the last few years. Iran’s oil minister said on Saturday that “OPEC and non-OPEC countries had given positive signals for an extension of output cuts, which Tehran would also back”. The Organization of the Petroleum Exporting Countries (OPEC)meets this month to discuss oil supply policy.

Trading volumes are lower than average due to the Labor Day/May Day holiday in Asia and Europe. Later this week Japan will be closed for a three-day holiday.

Traders will be watching comments from a policy meeting of the Federal Open Market Committee this week with the monthly U.S. employment report on Friday being a major focus. We will also see corporate earnings from global heavyweights. The second round of the French presidential election takes place May 7; candidate Marine Le Pen said Monday she would begin negotiations on a euro exit immediately if elected. Traders are also weighing the possibility of escalating tension between the U.S. and North Korea.

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