September Nonfarm Payrolls in Focus.U.S. Government Braces for Another Shutdown

TradingKey - Recent U.S. economic data showed resilience, dampening market expectations for dovish rate cuts. As a result, all three major U.S. equity indexes posted weekly losses last week, though the pullback was limited, and September overall remains a strong month for stocks.

This week, investors will focus on the September nonfarm payrolls report for further clues on the labor market. Additionally, the U.S. federal government faces a looming shutdown if Congress fails to act by September 29; funding expires on September 30, raising the risk of a government closure starting October 1.

In Japan, the ruling Liberal Democratic Party is set to hold its leadership election on October 4, with results expected the same day. Meanwhile, Chinese A-shares will be closed for eight days from October 1 to 8, as the Mid-Autumn Festival and National Day holidays coincide.

On Thursday, Tesla (TSLA.US) is expected to release its global vehicle deliveries for the third quarter. The market widely anticipates a robust performance in Q3 delivery figures.

 Preview of major events

U.S. September Jobs Report May Spark Fresh Financial Market Volatility

The U.S. September jobs report, set for release Friday, October 3, is critical for assessing the Federal Reserve’s future rate path following the central bank’s 25-basis-point cut in September. However, a potential government shutdown could delay the release of this and other key economic data.

Bank of America analysts said over the weekend that while the economic impact of a shutdown is typically small and short-lived, they warned that a prolonged closure—alongside former President Donald Trump’s threats to fire federal workers rather than place them on furlough—could have more lasting consequences. The bank added: “While a brief shutdown may not significantly affect the economy, it would delay the publication of key data ahead of the Fed’s next meeting.”

The U.S. government faces a shutdown as early as October 1.

The U.S. federal government’s current fiscal year funding will officially expire on September 30. Without congressional action, a partial government shutdown could begin on October 1.

Federal funding is set to run out at midnight on September 30. If lawmakers fail to reach agreement on the necessary appropriations bills by then, parts of the government will face a shutdown. Federal operations are typically funded through annual budget appropriations, which Congress is expected to pass before the start of the new fiscal year on October 1. However, due to increasingly intense partisan gridlock in recent years, Congress has often failed to finalize spending bills on time, relying instead on temporary continuing resolutions to keep the government running.

Goldman Sachs analyst Alec Phillips said: “The longer a government shutdown lasts, the broader the impact on federal employees will be. The longer it persists, the greater the indirect.

Goldman Sachs analyst Alec Phillips said: “The longer a government shutdown lasts, the broader the impact on federal employees will be. The longer it persists, the greater the indirect effects become.”

Japan's Ruling LDP to Hold Leadership Election on October 4

Japan's Prime Minister and Liberal Democratic Party (LDP) President Shigeru Ishiba has announced his decision to step down. Japanese media report that the ruling LDP plans to hold its leadership election on October 4. Huatai Securities expects the new prime minister to take office in October.

Currently, five main contenders have emerged: former LDP Secretary-General Toshimitsu Motegi, Chief Cabinet Secretary Yoshimasa Hayashi, Agriculture Minister Shinjiro Koizumi, and former economic security ministers Sanae Takaichi and Takayuki Kobayashi.

During this transition period, intra-party factional maneuvering is intensifying, leaving Japanese political uncertainty at elevated levels, according to Huatai Securities. The firm notes that Sanae Takaichi appears to have a higher chance of victory and her platform emphasizes fiscal expansion, which could potentially boost U.S. equities and strengthen the yen. However, such policies may also put further upward pressure on Japanese government bond yields.

Tesla's Q3 Deliveries Set to Be Released

On Thursday, Tesla (TSLA.US) is expected to report its global vehicle deliveries for the third quarter. The market widely anticipates a strong print, as U.S. consumers rush to purchase electric vehicles ahead of the scheduled expiration of federal tax credits on September 30.

Recently, UBS raised its Q3 delivery forecast for Tesla to 475,000 vehicles, representing a 3% year-over-year increase and a 24% sequential jump. The bank also expressed optimism that Tesla could surpass this estimate, potentially achieving a record-high quarterly delivery volume for the third quarter of this year.

Selected Economic Data

Tuesday: U.S. September Conference Board Consumer Confidence Index

Wednesday: U.S. September ADP Employment Change (in thousands)

Friday: U.S. September Nonfarm Payrolls (in thousands)

This week's featured events

Tuesday: President Donald Trump meets with bipartisan congressional leaders in urgent talks to avert a government shutdown

Wednesday: Federal Reserve Vice Chair Philip Jefferson delivers remarks

Friday: Bank of Japan Governor Kazuo Ueda visits Osaka and holds a press conference

Corporate Earnings

Tuesday: Nike (NKE.US)

Thursday: Tesla (TSLA.US)