Asian stock markets began the trading week with caution on Monday, September 29, 2025, as investors braced for a potential U.S. government shutdown set to start on Wednesday if Congress fails to reach a funding agreement. The looming shutdown has raised concerns about delays in the release of critical U.S. economic data, including the September payrolls report, which could affect global market sentiment.
In Hong Kong, the Hang Seng Index rose 193 points, or 0.74 percent, to open at 26,321, reflecting a tentative positive start despite the uncertainty. Mainland China's markets showed mixed openings: the Shanghai Composite Index was flat at 3,828, the Shenzhen Component Index increased by 0.3 percent to 13,248, and the ChiNext Index, which tracks growth enterprises, rose 0.43 percent to 3,165. Japan's Nikkei slipped 0.7 percent after a strong September gain of 6 percent, while South Korea's market bounced 1.2 percent, extending its monthly gains to 6.3 percent.
The risk of a U.S. government shutdown stems from ongoing budget negotiations in Washington, D.C., where President Donald Trump planned to meet with top Democratic and Republican congressional leaders on Monday to discuss extending government funding. Without a deal, non-essential government operations are expected to halt starting Wednesday, coinciding with the implementation of new U.S. tariffs on heavy trucks, pharmaceuticals, and other goods.
Analysts from Bank of America (BofA) noted that a prolonged shutdown could leave the Federal Reserve without official government data when it meets on October 29, potentially complicating monetary policy decisions. They estimated that a shutdown would reduce U.S. economic growth by about 0.1 percentage points for each week it lasts but suggested the impact on financial markets has historically been minimal. However, they cautioned that permanent layoffs resulting from the shutdown could significantly affect payroll figures and consumer confidence.
Market expectations currently imply a 90 percent chance of a Federal Reserve interest rate cut in October, with a 65 percent probability of another cut in December. The uncertainty surrounding the shutdown adds complexity to these forecasts.
Additionally, there is uncertainty about a scheduled meeting of U.S. military leaders in Quantico, Virginia, on Tuesday, which Defense Secretary Pete Hegseth will attend alongside President Trump. The outcomes of this meeting remain unclear but are being closely watched by investors.
Despite the cautious mood, some analysts expect equities to receive support from typical new-quarter buying trends, as the S&P 500 has historically gained in 74 of the fourth quarters. Investors in Asia remain watchful of developments in the U.S. political landscape, which continue to influence regional market dynamics.
