Global Stocks Muted After U.S. Government Shutdown

By FeaturesDow Jones Newswires

S&P 500 futures edge lower after government shutdown

-- Euro buoyant on German coalition talks

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-- Shares of Apple suppliers fall in Asia

Global stock markets were muted on Monday as a U.S. federal government shutdown was poised to stretch into a third day.

The Stoxx Europe 600 opened flat after three straight weeks of gains, following a mixed session in Asia. Futures pointed to a 0.2% opening loss for the S&P 500 and the Dow Jones Industrial Average.

Lawmakers on Sunday failed to end a federal government shutdown which began after the Senate rejected a one-month spending bill. The shutdown could sideline significant numbers of federal employees and government contractors and potentially dampen quarterly growth figures.

Still, investors largely assessed the shutdown, even if long-lasting, would be unlikely to disturb the robust global economy that has helped power stocks and temper volatility.

"I don't think it's really going to impact markets," said Sandy Villere III, portfolio manager at Villere & Co. "If this were the first time we'd ever faced this, it'd be one thing," but investors have seen this happen many times before, he said.

Others said it was unlikely to become a real source of volatility for now. "Financial markets don't need to worry much--unless the mess drags on until March," said Erik Nielsen, global chief economist at UniCredit, referring to when debt ceiling debates will likely escalate to avoid a U.S. default.

Yields on 10-year Treasurys edged higher Monday to 2.651% from 2.639% on Friday, which was its highest afternoon price since July 2014.

German bund yields were steady at 0.507% from 0.506%, while the yield gap between Spain and Italy over Germany continued to narrow. Yields move inversely to prices.

That came after Angela Merkel 's bid to form her fourth government cleared what had been billed as its highest hurdle Sunday after the center-left Social Democrats voted in favor of entering formal coalition talks with the German leader's conservative bloc.

The euro edged up 0.2% to $1.2240 on Monday. While it may be a step closer to resolving political uncertainty in Germany, some analysts noted a final coalition deal is still far from guaranteed, mitigating the impact on the euro.

The WSJ Dollar Index, which tracks the dollar against a basket of 16 other currencies, was down 0.1%.

In corporate news, shares of Sanofi fell 2.3% after the French drugmaker said it would buy hemophilia drugmaker Bioverativ Inc. for more than $11.5 billion.

Shares of UBS Group also fell 2.8% after the Swiss bank said charges related to the U.S. corporate tax overhaul pushed it into a fourth-quarter loss.

Market reaction in Asia was muted Monday after the partial shutdown of the U.S. federal government. Japan's Nikkei Stock Average was flat while Hong Kong's Hang Seng Index edged up 0.4%.

Shares of some Apple suppliers declined across the region, however, dragging down some tech-heavy indexes.

South Korea's Kospi fell 0.7% amid a 2.2% drop in shares of index heavyweight Samsung Electronics. The company's stock fell against a backdrop of increased caution over demand for rival Apple's most expensive iPhone.

While the South Korean company has its own line of smartphones, it is also a global manufacturer of components. Apple uses Samsung's technology for the iPhone X.

S.K. Kim, who tracks Samsung for Daiwa Securities, said there were also some concerns Apple could stop using OLED screens because of quality issues.

Japan's Alps Electric, which makes sensors, dropped 1.4%.

Shenzhen stocks rebounded around 1.2% after a period in which Chinese investors focused on large-capitalization names, many of which are listed in Shanghai.

Harriet Torry contributed to this article.

Write to Riva Gold at riva.gold@wsj.com and Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

January 22, 2018 03:52 ET (08:52 GMT)

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