Will the US avoid a government shutdown today?

• Europe follow bumper Asian session

• UK growth turns negative ahead of next week’s BoE meeting

• Will the US avoid a government shutdown today?

European markets are in the green today following a blockbuster session for Asian equities with investors seemingly finding value away from the US right now. While the S&P 500 slumped into correction territory, the PBoC pledge to enact further stimulus brings optimism over the direction of travel for the world’s second largest economy. Trump’s overwhelming focus on China in his first stint in the White House provided them with a warning sign the led to increased diversification in their exports during Biden’s term. While recent declines have taken the S&P 500 P/E ratio down from 27 to 25, the recent developments under Trump highlights why many see Chinese stocks as more attractive, with the Hang Seng’s P/E ratio standing at 15.

This morning has seen a raft of disappointing economic data out of the UK, with GDP, manufacturing, and industrial production all falling into negative territory. The UK economy contracted by 0.1% in January, missing expectations and reversing December’s 0.4% growth, as manufacturing (-1.1%) and mining (-3.3%) dragged down output. While services managed a slight 0.1% gain, overall momentum remains weak. Despite this, markets still see only an 8% chance of a Bank of England rate cut next week, with expectations instead pointing to a likely 25bp cut in May. However, today’s data certainly adds to the story around disruption in the manufacturing space, with Trump’s tariffs adding significant uncertainty over the cost of goods and global trade relationships.

Looking ahead, today sees a focus on the potential for a government shutdown in the US, which has added yet another area of uncertainty over the course of this week. Markets hate uncertainty, and Trump’s second tenure in the White House has served to provide huge instability over expectations for trade, jobs, inflation, and government spending. Some say that Trump would relish the opportunity to close much of the government, opting to only seek funding for the areas that he sees as necessary. However, Chuck Schumer’s indication that he would vote for a continuing resolution that would fund the government for another six-months does raise hopes that an agreement would be reached before todays’ deadline.