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European stock have best week since April U.S. shut down

means

no jobs report on Friday Gold set for seventh straight weekly

gain

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Yen on pace for strongest week vs dollar since May

By Marc Jones

LONDON, Oct 3 (Reuters) - World stocks were on course

for a solid weekly gain and more record highs, as the seemingly

unstoppable rally in tech shares and expectations of lower U.S.

interest rates helped offset U.S. government shutdown

uncertainty.

Investors have mostly shrugged off the shutdown, the 15th

since 1981, but on Friday it meant traders weren't getting

probably the single most-watched piece of market moving economic

data - monthly U.S. payrolls figures.

MSCI's main 47-country index of world shares

didn't seem fussed with overnight record highs on Wall Street

and in Europe on Thursday, where equities are having

their best week since April.

Euro zone services sector PMIs helped the euro tick

up too on Friday as they accelerated to an eight-month high

thanks to moderate growth in Germany, Italy and Spain, although

France's political uncertainty continued to weigh there.

U.S. economist at Natixis, Christopher Hodge, said the lack

of payrolls data later in some ways bolstered the current view

among forecasters that U.S. interest rates will be cut again

this month.

"The baseline (of a rate cut) is the default in the absence

of new information," Hodge said, adding the markets have also

had plenty of practice now with dealing with U.S. shutdowns.

"The only thing that could be different this time is that we

are in an economic and policy cycle that is a lot more

ambiguous."

Benchmark government bond yields - the main driver of global

borrowing costs - nudged higher in both the U.S. and

the euro zone, although they dropped in the UK after

poor PMI data there, and all were down for the week.

Markets are almost fully pricing in a 25 basis point Fed

rate cut this month and at least four cuts by the end of 2026.

GOING FOR GOLD

The overnight rise in MSCI's main Asian share index meant it

closed with a 2.3% weekly gain and has now risen about 23% this

year.

China and some other parts of Asia had been closed for a

holiday, meaning trading was thinner than usual although Taiwan

hit a record high and Japan's Nikkei jumped 1.5%

ahead of the crucial weekend vote that will determine the

country's next prime minister.

Wall Street futures were pointing higher again too. All

three major U.S. indexes had closed at fresh peaks on Thursday,

buoyed as insatiable investor enthusiasm for all things AI

continued.

Weiheng Chen, global investment strategist at J.P. Morgan

Private Bank, said investors appear willing to give Washington

time to resolve its disagreements, though a prolonged shutdown

may start to move markets.

"For now, investors remain more focused on the potential

impacts of the Fed's rate-cutting cycle, trade and immigration

policy, economic data, and corporate earnings," Chen said.

With no government reports on the labour market to take cues

from, investors have turned to alternative data from public and

private sources and so far they point to a sluggish U.S. labour

market.

That has left the dollar under pressure. The dollar index

, which measures it against six other top currencies, was

sagging again in Europe and on course for its biggest weekly

drop since August.

The Japanese yen has been the biggest beneficiary

of the dollar's dip although it weakened 0.3% to 147.74 per

dollar on Friday after Bank of Japan Governor Kazuo Ueda left

markets guessing on when it will next hike interest rates.

In commodities, oil prices recovered slightly on the day but

were on course for their steepest weekly drop in over three

months. Brent crude futures was at $64.81 a barrel with

U.S. West Texas Intermediate crude at $61.30 a barrel.

Precious metal gold, meanwhile, was up and on course

for its seventh straight week of gains at $3,860, after hitting

a new record of $3,896 an ounce on Thursday.

It is viewed as a safe-haven asset during times of

uncertainty and thrives on low interest rates. It has now surged

47% this year.

"As the U.S. dollar's status as the global reserve currency

is tested, gold is emerging as the pre-eminent safe haven and we

continue to view it as the ultimate diversifier," said Greg

Hirt, global CIO for multi asset at AllianzGI.

(Additional reporting by Ankur Banerjee in Singapore; Editing

by Susan Fenton)