U.S. ends its longest federal government shutdown in history

United States

U.S. equities had a mixed performance over the week. The Dow Jones Industrial Average and the S&P 500 Index managed to post small gains, while the Nasdaq Composite, the S&P MidCap 400, and the Russell 2000 Index declined. For most of the week through Thursday, concerns about stretched valuations and a shift in sentiment toward companies heavily associated with artificial intelligence spending contributed to a rotation out of many growth stocks that had previously pushed benchmarks toward record highs. A volatile session on Friday, marked by limited major news, enabled some indices to recover and finish the week modestly higher.

An important development during the week was the conclusion of the longest federal government shutdown in U.S. history. The shutdown ended Wednesday evening after President Donald Trump signed a spending bill funding the government through January 30. Although this removed a major source of uncertainty, U.S. markets still fell sharply on Thursday, as investors assessed how long it would take for government operations and related data flows to normalize.

Economic releases remained a central focus for the market. According to White House representatives, some October employment and inflation data may never be published due to disruptions. The Bureau of Labor Statistics (BLS) further commented that it might require additional time to determine new release schedules. However, on Friday afternoon the BLS confirmed it would publish the September jobs report on Thursday, November 20.

December rate cut odds decline amid cautious Fed commentary

Several Federal Reserve officials adopted a tone that investors interpreted as cautious, which weighed on equity sentiment. Atlanta Fed President Raphael Bostic remarked on Wednesday that labor market information remained ambiguous and that the data did not clearly justify an aggressive policy shift, especially when compared with inflation risks that he described as more straightforward. He stated his view that the current policy stance was only marginally restrictive and preferred maintaining interest rates until more definitive signs showed inflation moving toward the Fed’s 2% objective.

Similarly, St. Louis Fed President Alberto Musalem warned that policymakers should proceed carefully, while Cleveland Fed President Beth Hammack said policy should remain somewhat restrictive to address persistent inflation pressures.

Market expectations for a rate cut following the December Federal Reserve meeting fell to roughly 46% by Friday afternoon, compared with about 67% the prior week and nearly 95% one month earlier, based on the CME FedWatch tool. Small-cap equities, which tend to react more strongly to interest rate shifts, underperformed as the Russell 2000 Index declined 1.83%.

Treasuries slide while munis outperform

U.S. Treasury securities recorded negative weekly returns, with yields moving slightly higher across most maturities after fluctuating earlier in the week. Traders at T. Rowe Price highlighted that the 10-year Treasury yield continued to move in a narrow 10-basis-point range near 4.1%, where it has hovered since the Federal Reserve reduced rates in October.

Municipal bonds fared better than Treasuries. The muni market saw an uptick in issuance midweek following Tuesday’s Veterans Day closure, and many new deals were oversubscribed. High yield municipal bonds initially moved higher on company-specific developments and various earnings results but gave back part of their gains due to broader macroeconomic weakness later in the week.

U.S. Index Performance

The chart figures are illustrative only and do not represent any specific investment. Past performance does not predict future results. Data sources remain Reuters via Yahoo! Finance and Bloomberg. Index descriptions match the original definitions.

Europe

Pan-European markets rise as U.S. government reopens

Measured in local currency, the STOXX Europe 600 Index advanced 1.77%, supported by relief following the reopening of the U.S. federal government, although fading enthusiasm for artificial intelligence-related shares restrained gains. Major European equity markets moved higher, with Germany’s DAX adding 1.30%, France’s CAC 40 rising 2.77%, and Italy’s FTSE MIB gaining 2.51%. The UK’s FTSE 100 was relatively flat.

UK labor market weakens while GDP growth slows

A softer-than-expected set of UK economic indicators weighed on confidence. Unemployment for the three months through September increased to 5%, the highest level since January 2021. Wage growth also eased, with weekly earnings excluding bonuses rising 4.6% year-over-year, compared with 4.8% previously.

GDP growth slowed more than anticipated to 0.1% in the third quarter, versus the consensus estimate of 0.2%. September GDP contracted 0.1% from August, partly due to a 28.6% plunge in car production following a cyberattack that temporarily shut down Jaguar Land Rover’s operations.

Eurozone production weaker than forecast

Industrial activity in the eurozone edged up 0.2% in September after falling 1.1% in August, well under the 0.9% expected. Output in Ireland dropped sharply, contrasting with stronger-than-average gains in Germany, Italy, and France.

German investor sentiment deteriorates

Confidence in Germany unexpectedly dipped, as indicated by the ZEW survey. According to ZEW President Achim Wambach, investor attitudes reflected declining trust in the ability of German policymakers to address pressing economic issues.

Japan

Japan’s stock markets advanced, with the Nikkei 225 Index rising 0.20% and the TOPIX Index climbing 1.85%. Global markets found some support from the conclusion of the U.S. shutdown, although persistent worries regarding high valuations in AI-linked industries weighed on Japan’s technology sector.

Expectations surrounding the policy direction of incoming Prime Minister Sanae Takaichi contributed to yen weakness. Her approach appears to favor accommodative fiscal policies and a gradual path for Bank of Japan interest rate adjustments. The yen fell to around JPY 154.6 per U.S. dollar from about JPY 153.4 the prior week. Takaichi emphasized the need for flexible, multi-year fiscal planning and more active government spending to stimulate economic momentum.

Investors lean to January rate hike

The 10-year Japanese government bond yield increased slightly to 1.70% from 1.68% the previous week. Markets now broadly expect that if the BoJ adjusts rates, it is more likely to happen in January rather than December. Governor Kazuo Ueda suggested ongoing progress toward the central bank’s inflation target of 2%.

The Reuters Tankan monthly poll indicated that manufacturing sentiment reached its strongest level in almost four years, with the index rising to +17 from +8 in October. Export-driven industries, especially electronics and automotive companies, benefited from the boost in global competitiveness stemming from the weaker yen.

China

Chinese markets retreated after strong gains the prior week. The CSI 300 Index fell 1.08% and the Shanghai Composite slipped 0.18%. In contrast, Hong Kong’s Hang Seng Index rose 1.26%.

Recent data signaled a deceleration in China’s economic momentum entering the fourth quarter. Fixed asset investment contracted 1.7% over the first ten months of the year, the largest decline on record for that period. Industrial output grew 4.9% in October year-over-year, below expectations, and retail sales increased 2.9%, marking the fifth consecutive month of deceleration.

The property sector remained a major drag. New home prices across 70 cities fell 0.45% in October compared with September, the steepest monthly decline in a year. Prices for existing homes decreased 0.66%, the fastest drop in 13 months. Prolonged weakness in housing has weighed on consumer sentiment and contributed to persistent deflationary pressures observed since early 2023.

Despite weaker-than-expected October data, most economists believe China can still achieve its annual growth target of roughly 5%, supported by a one-year trade truce with the U.S. and about RMB 1 trillion in stimulus approved since late September. Many analysts expect these measures to begin contributing to activity soon.

Other Key Markets

Colombia

Headline inflation for October rose 0.2% month-over-month, marginally above expectations for 0.1%. The year-over-year reading came in at 5.5%, aligning with forecasts. Core inflation registered 0.3% monthly and 5.3% annually, slightly higher than projections of 0.2% and 5.1%. Entertainment, health care, and housing costs contributed to the increase.

According to Aaron Gifford of T. Rowe Price, the annual uptick largely reflects base effects, as the latest monthly readings, including core inflation, are relatively steady or slightly softer. He believes the data will keep policymakers cautious but not compel immediate interest rate increases.

Romania

Romania’s central bank kept its key policy rate unchanged at 6.50%, alongside a Lombard rate of 7.50% and a deposit rate of 5.50%. Policymakers noted elevated inflation, with readings of 9.76% in October, 9.88% in September, and 9.85% in August. Inflation rose from the June level of 5.66% following the end of the electricity price cap and adjustments in VAT and excise taxes.

The central bank’s November 2025 Inflation Report projects a modest decline in inflation over the next three quarters, followed by a sharp drop in the third quarter of 2026 as the effects of recent supply shocks diminish. Officials stressed that steady rates, structural reforms, and EU funding will help support long-term growth and maintain macroeconomic stability.