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• Equities rebound, with Chinese inflation rising to 0.2%
• Weekend vote brings likely end to historic shutdown
• $2000 tariff checks put spotlight on Supreme Court decision

European markets have enjoyed a positive start, feeding off the news that the historic 40-day US shutdown look set to reach a conclusion this week. On the data front, the week kicked off with inflation out of China, where a surprise rebound into positive territory brought the highest figure since February (0.2%). Optimists will see this as a sign of resurgent demand from Chinese consumers, with Golden Week celebrations sparking a surge in travel, food, and transport spending. Coming off the back of a week that has been dominated by concerns around tech valuations, it appears that investors are happy to instead focus their energy on buying back into the bull market today. One of the notable themes has been strength for commodity focused firms, with precious metal and oil & gas stocks leading the way higher.

This weekend saw a breakthrough that brought a 60-40 vote in favour of passing a bill that will end the historic 40-day shutdown. Notably, the pressure had ratcheted up off the back of aviation disruption that saw over 3000 flights cancelled on Sunday alone. This was a clear sign that the leaders in Washington cannot simply let this impasse last forever, with the Democrats essentially giving up on their central demands to extend the Affordable Care Act tax credit system which expires on December 31. That expiry comes ahead of the new deadline, with this agreement only taking us through until January 31, although the fact that the Obamacare deadline will have passed does make another similarly long shutdown less likely.

While markets cheer the news of a likely end to the shutdown, Trump had already sought to win over middle America by promising $2000 tariff-funded checks for non-high-income citizens. A sudden injection of disposable income for the entire country undoubtedly provides a potential shot in the arm for businesses reliant on a strong consumer. However, the caveat here is that such a promise comes at a time where we also see growing concern that the US supreme court may rule that Trump’s tariffs have been implemented illegally. As such, this looks like Trump’s way to turn the entire nation on the Supreme Court, making the stimulus payments dependent upon the tariff decision. So, with Polymarket currently pricing a mere 24% chance the Supreme Court rule for Trump’s tariffs, there is a high likeliness that we see the tariffs and stimulus checks wiped out in one go.

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