U.S. federal shutdown nears end – Markets breathe a sigh of relief

With the U.S. government shutdown finally showing signs of a resolution, equity markets are recovering from weeks of uncertainty. Investors are refocusing on earnings, economic data and the policy backdrop rather than the political impasse.

What is a government shutdown and why is it happening

Government shutdown occurs when the U.S. Congress fails to pass a timely budget or temporary funding bill for federal agencies. As a result, the government loses the authority to spend on necessary activities and must shut down a large number of offices and services. Civil servants go on unpaid leave, federal agencies cease operations and some public services are interrupted.

Only essential services such as the military, security forces, aviation and emergency health care are fully operational. Everything else, from national parks to research institutions, finds itself in a restricted mode of operation. Politically, this is always the result of a dispute between Republicans and Democrats over…