Why is ASX 200 racing higher today following the US government shutdown?

ASX 200 investors are shrugging off the US government shutdown today. But why?

Key points
  • The ASX 200 Index is experiencing its strongest performance in weeks amidst a US government shutdown.
  • Despite the United States facing a budget impasse, both the ASX 200 and US markets are rallying, with expert insights suggesting typical short-lived impacts from such shutdowns.
  • Analysts advise that the prolonged shutdown could affect US economic data releases, but interest rate cuts are still anticipated by the Federal Reserve this month.

The S&P/ASX 200 Index (ASX: XJO) is enjoying its strongest run in weeks.

At time of writing in late morning trade on Thursday, the benchmark Aussie index is up 1.1% at 8,943.3 points. If the index can hold these gains by close, it will mark the best day for investors since 21 August.

And it's happening as the world digests the fact that the United States government has shut down non-essential services amid an ongoing budget impasse in the US Senate.

As for how the biggest three ASX 200 stocks are faring today, Commonwealth Bank of Australia (ASX: CBA) shares are up 1.6% at $169.77 each; shares in mining giant BHP Group Ltd (ASX: BHP) are up 1.8% at $42.22 apiece; and CSL Ltd (ASX: CSL) shares are up 2.9%, changing hands for $204.60 each.

The gains we're seeing in the Aussie market come after the S&P 500 Index (SP: .INX) closed up 0.3% overnight, marking another new record high. Tech stocks also rallied, with the Nasdaq Composite Index (NASDAQ: .IXIC) closing up 0.4%.

So, why are investors shrugging off the US government shutdown?

Here's what the experts are saying.

the australian flag lies alongside the united states flag on a flat surface.

Image source: Getty Images

Why the ASX 200 and US stocks are rallying

Alfred Tang, head of trading at Webull Securities Australia, noted that while most US shutdowns only last a few days, during US President Donald Trump's first term, "the US government shut down for a record 35 days".

Tang noted:

However, during that time S&P 500 volatility was nothing out of the ordinary. US markets closed higher by the time the shutdown ended, and the ASX 200 closed 8% higher by the time negotiations ended and a budget was passed.

Sounding a note of caution, Tang added:

Traders and investors should remember that past performance is no guarantee of future returns – we are dealing with an incredibly hostile US Congress, and as key government departments begin to be forced to walk off the job, traders would be wise to expect the unexpected.

Commenting on the strong run in US stock markets, and by connection the big lift on the ASX 200 today, Bloomberg strategists said:

Late-in-the-year seasonality favours stocks as the dominant US asset, while the dollar has been doomed to be a laggard. This year is likely to follow that pattern, even as a US shutdown adds a new factor into the mix.

One area of concern is that the shutdown of services in the world's biggest economy could delay the release of critical economic data that the US Federal Reserve depends on to make its interest rate decisions.

Though Atakan Bakiskan, US economist at Berenberg, believes the central bank will still cut US interest rates by 0.25% this month regardless.

Bakiskan said:

We believe that even if the September nonfarm payroll report cannot be published before the Fed meeting, officials will have enough information about the labour market to deliver another 25 basis point 'insurance' cut at the October meeting.

And we'll leave off with this last piece of advice for ASX 200 and US stock market investors.

Lauren Goodwin, economist at New York Life Investments, said (quoted by Bloomberg), "Investors can operate under a simple rule of thumb: the longer a shutdown lasts, the greater its effects on consumer confidence, economic activity, and market outcomes."

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL. The Motley Fool Australia has recommended BHP Group and CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on ASX Share Market News

Smiling man working on his laptop.
Best Shares

BHP vs Codan: Which ASX 200 share is the stronger buy today?

BHP and Codan are both flying, but which ASX share is truly the better buy today? I break down the…

Read more »

Watering can pouring water on increasing piles of coins with green plants on them and a piggy bank and coins on the table.
Opinions

$3,000 buys 1,463 shares in an impressively reliable ASX dividend stock

Here’s what makes this stock one of the best picks for dividends, in my view.

Read more »

A woman is very excited about something she's just seen on her computer, clenching her fists and smiling broadly.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a happy end to the trading week for investors this Friday.

Read more »

REIT on wooden circles with real estate investment trust written above on a yellow background.
REITs

6 ASX REITs just hit 52-week lows. Do any brokers say buy?

Several ASX real estate investment trusts (REITs) have hit 52-week lows as the property sector underperforms the market on Friday.…

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Broker Notes

Buy, hold, sell: CBA, Capstone Copper, Codan shares

Let's take a look at some new ratings from the experts.

Read more »

a woman peers over a surface with a happy, curious look on her face with eyes wide as though she is overhearing something.
Broker Notes

5 ASX 200 shares brokers tip to rocket 25% to 77%

Looking for buy-the-dip opportunities in today's weak market? Experts reveal their buy calls.

Read more »

Young successful engineer, with blueprints, notepad, and digital tablet, observing the project implementation on construction site and in mine.
Broker Notes

Morgans tips 290% upside for this up-and-coming ASX copper company

This company is in the right place at the right time, the broker says.

Read more »

A woman in a red dress holding up a red graph.
Broker Notes

In a tough retail environment, what's the outlook for Wesfarmers shares?

Analysts argue the major retailer is resilient in the face of tough trading conditions.

Read more »