Highlights
U.S. equities fell over the week as concerns resurfaced around escalating U.S.–China trade tensions and the potential fallout from an extended U.S. government shutdown. Early in the week, the Nasdaq Composite and S&P 500 indexes traded higher, lifted by continued enthusiasm for artificial intelligence–related companies. However, markets reversed course on Friday after President Donald Trump said he was considering “a massive increase of tariffs on Chinese products” in retaliation for Beijing’s proposed restrictions on rare earth exports. The risk-off move sent investors into safe havens, with gold prices topping USD 4,000 per ounce for the first time—reflecting elevated geopolitical uncertainty. With limited new economic data available due to the shutdown, focus shifted to the Federal Reserve’s September meeting minutes, released Wednesday. Policymakers acknowledged persistent inflationary pressures alongside signs of labour market weakness, noting that “upside risks to inflation remained elevated” while “downside risks to employment had increased.” Most participants agreed that additional policy easing later this year would likely be appropriate, though a few favoured a more restrained approach, arguing that monetary policy might not yet be sufficiently restrictive to warrant further cuts. Investors are also turning their attention toward the third-quarter earnings season, beginning with JPMorgan Chase’s report on October 14. Corporate earnings are expected to play a more significant role in shaping sentiment in the absence of key economic data releases. Analysts surveyed by FactSet anticipate a ninth consecutive quarter of earnings growth for the S&P 500. Meanwhile, across the Atlantic, European equities declined as investors booked profits after record highs and as renewed global trade tensions and French political instability weighed on sentiment. The pan-European Euro STOXX 600 fell by 1.75% while the UK’s FTSE 100 eased 0.67%. German industrial output fell 4.3% month over month in August, far exceeding expectations and fuelling fears of a potential recession. Moreover, France’s government fell into disarray as Prime Minister Sébastien Lecornu resigned following the rejection of President Emmanuel Macron’s new cabinet by opposition parties. Conversely, Japanese equities surged, with the Nikkei 225 up 5.07%, after Sanae Takaichi won the Liberal Democratic Party (LDP) leadership contest, positioning her as the likely next prime minister. Investors welcomed expectations for fiscal stimulus and continued accommodative monetary policy. However, post-market news that coalition partner Komeito would exit the alliance raised questions about Takaichi’s path to the premiership and increased speculation of a snap election. Chinese equities delivered mixed results during the holiday-shortened week. The CSI 300 fell 0.51%, while the Shanghai Composite edged up 0.37%. Looking ahead, markets are focused on China’s upcoming Fourth Plenum (October 20–23), where leaders are expected to outline economic priorities for the next Five-Year Plan. Investors will closely watch for policy guidance on growth, consumption, and industrial strategy.
Data Highlights
Canada’s unemployment rate remained unchanged at 7.1%, in line with the previous reading and just below the 7.2% forecast. Switzerland’s unemployment rate held steady at 2.8%, slightly above the 2.7% forecast by analysts. In the Eurozone, retail sales growth slowed to 1.0%, below both the 2.0% forecast and the prior 2.1%, reflecting softer consumer demand. The Reserve Bank of New Zealand surprised markets by cutting its policy rate by 50 basis points to 2.5%, below both the 2.75% forecast and the previous 3.0%.
Week Ahead
U.K Unemployment Rate – Tuesday | China Inflation Rate YoY– Wednesday | Australia Unemployment Rate, U.S Retail Sales, U.S Producer Price Index – Thursday
