By Geoffrey Smith 

Investing.com — Lawmakers are set to extend the U.S. federal government’s funding through December, but the fate of two major spending bills is still in the balance. The U.S. GDP figures for the second quarter will be reviewed and weekly jobless claims will be due. China’s manufacturing sector fell into recession for the first-time since the peak of the pandemic. Capitol Hill’s Janet and Jerome Show return to their show, while the dollar rises to a 12 month high. A federal probe of Virgin Galactic ends. The energy crisis in China, Europe and China continues. This is what you should know about financial markets Thursday 30 September.

1. A temporary fix for the funding the government

Democratic Senator Chuck Schumer said lawmakers have reached an agreement in principle to extend the federal government’s funding until December 3^rd, averting the risk of a shutdown from tomorrow.  Washington, D.C. will vote on Thursday morning.

However, the Democrats’ spending bills remain deadlocked due to internal divisions. Nancy Pelosi the House Speaker has changed course and will vote Thursday on an infrastructure bill which is expected to have bipartisan support. That’s effectively daring the progressive wing of the party to take responsibility for yet more paralysis in Washington that could cost the party dearly at next year’s mid-term elections.

The House will also get to hear testimony from Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen from 10 AM ET, which is likely to go over the same ground as Tuesday’s testimony to the Senate Banking Committee.

2. Dollar hits 12-month high

The dollar continues to strengthen, thanks to a combination of fears for growth in China, and the uptick in risk aversion triggered – paradoxically – by the political theater in the U.S., where a worst-case outcome would be ‘catastrophic’, according to Yellen.

By 6:15 AM ET (1015 GMT), the that tracks the greenback against a basket of developed market currencies was up 0.1% at 94.42, having posted big gains against both the yen and sterling this week. It’s also up by more than 2% this week against the Mexican peso and Brazilian real. Both the central banks in Mexico and Colombia will likely raise their key interest rates by 25bps each on Thursday.

John Williams, President of the New York Fed will speak to investors at 10 AM ET.

3. Stocks set to open higher; Virgin Galactic in focus

U.S. stocks are set to open the day higher, but the remains on course for its biggest monthly loss since March 2020 as worries over federal government paralysis and the withdrawal of monetary support persist.

By 6:15 AM ET (1015 GMT), were up 160 points, or 0.5%, while S&P 500 and were up in parallel. The had slipped another 0.2% on Thursday, as money flowed back into value stocks, leaving the other two main indices with modest gains.

Virgin Galactic is likely to come under scrutiny later. The stock soared after the federal regulators decided not to pursue the company’s safety violations during the initial flight. All three companies report earnings: Paychex (NASDAQ) Carmax and Jefferies.

4. U.S. GDP revision, jobless claims due as China slips into contraction 

It’s a heavy day for economic data, with the latest revisions to U.S. gross domestic product in the second quarter due at 8:30 AM ET, along with data for initial jobless claims, which have risen for the last two weeks.

Data from around the world showed a mixed picture overnight, with China’s official manufacturing purchasing managers index falling below the key 50 threshold for the first time since February 2020 as the country’s energy crunch intensified. Japan’s retail sales and industrial production meanwhile showed the effects of Covid-19 related lockdowns.

The South Korean industrial production data were more robust than anticipated and the U.K.’s GDP for 2Q was sharply revised. Germany’s jobless total fell in September, while French consumer spending held up well.

5. Oil rangebound as Europe energy crisis continues

Crude oil prices remained rangebound after data confirming a first rise in U.S. stockpiles in over two months took some of the heat out of the recent rally.

By 6:25 AM ET, futures were down 0.2% at $74.69 a barrel, while futures were down 0.2% at $77.91 a barrel.

There was no let up in Europe’s ongoing energy crisis, however, as and power prices both touched new highs in Germany.