United States
Equities retreat amid renewed trade frictions and shutdown concerns
Major U.S. stock indexes ended lower for the week as investors grew cautious over a potential revival of trade hostilities between the U.S. and China, alongside persistent anxiety surrounding the ongoing government shutdown.
Early in the week, enthusiasm around artificial intelligence–related companies helped lift sentiment, with the Nasdaq Composite and S&P 500 staying in positive territory. Optimism was boosted by a series of AI-related deals — notably a new partnership between Advanced Micro Devices and OpenAI, which sent AMD shares surging more than 20% on Monday.
However, momentum reversed sharply on Friday after President Donald Trump stated on social media that he was considering “a massive increase of tariffs on Chinese products” in response to China’s proposed new restrictions on rare earth exports. The announcement reignited concerns about global trade disruptions and economic stability.
Meanwhile, gold prices extended their record-breaking rally, surpassing USD 4,000 per ounce for the first time — a reflection of heightened geopolitical and economic uncertainty.
Market participants also looked ahead to the upcoming third-quarter earnings season, set to begin with JPMorgan Chase on October 14. With government offices still closed and key economic data releases delayed, earnings figures could exert an outsized influence on market direction. According to FactSet, analysts expect the S&P 500 to record its ninth consecutive quarter of year-over-year profit growth.
Fed minutes show cautious support for rate cuts
In the absence of major economic data during the shutdown, investors turned their attention to the release of minutes from the Federal Reserve’s mid-September policy meeting.
The minutes revealed a division of views among policymakers as they weighed conflicting economic signals. Some participants expressed concern over still-elevated inflation and a softening labor market, noting that “upside risks to inflation remained high while downside risks to employment had increased.”
Despite the mixed tone, a majority of Fed officials agreed that further policy easing could be appropriate later this year. Others, however, emphasized that monetary policy “may not be particularly restrictive” and thus warranted a more measured approach to future rate decisions.
Consumer confidence steady; Treasuries gain on safe-haven demand
The University of Michigan’s preliminary October Consumer Sentiment Index registered 55, nearly unchanged from the prior month. Consumers were modestly more optimistic about their current finances and short-term business conditions, though their expectations for durable goods purchases weakened. Inflation expectations for the year ahead edged down to 4.6% (from 4.7%), while long-term expectations held steady at 3.7%.
In fixed income markets, U.S. Treasuries advanced as yields declined sharply amid rising trade tensions and political gridlock. The renewed flight to safety supported government bonds, while municipal securities traded largely flat amid moderate new issuance.
Investment-grade corporates lagged Treasuries due to muted issuance and selective investor demand. Meanwhile, sentiment in the high-yield bond market softened as sellers outnumbered buyers and trading volumes fell below average levels.
Major U.S. Indexes
| Index | Friday’s Close | Weekly Change | % Change YTD |
|---|---|---|---|
| DJIA | 45,479.60 | -1,278.68 | 6.90% |
| S&P 500 | 6,552.51 | -163.28 | 11.41% |
| Nasdaq Composite | 22,204.43 | -576.08 | 14.98% |
| S&P MidCap 400 | 3,161.88 | -127.05 | 1.31% |
| Russell 2000 | 2,394.60 | -81.58 | 7.37% |
Source: Reuters, Yahoo! Finance, Bloomberg. Past performance does not guarantee future results.
Europe
Equities pull back after record highs; Germany’s output declines
European equities retreated after hitting all-time highs earlier in the week. The STOXX Europe 600 Index fell 1.10%, with profit-taking activity and renewed global trade tensions weighing on sentiment. Political uncertainty in France further dampened investor confidence.
Among major markets, Germany’s DAX slipped 0.56%, France’s CAC 40 dropped 2.02%, and Italy’s FTSE MIB fell 2.80%. The UK’s FTSE 100 eased 0.67%.
In Germany, industrial production plunged 4.3% in August, well below expectations, signaling a deepening slowdown. Auto manufacturing suffered the largest decline, while pharmaceutical and machinery output also weakened. Exports fell 0.5% month over month, with shipments to the U.S. — Germany’s top trading partner — down 2.5%, and a 20.1% year-over-year drop in exports to the U.S. reignited recession fears.
In response, the German government announced a fiscal package aimed at reducing budget costs and revitalizing the auto sector, including new subsidies for locally made electric vehicles and welfare spending adjustments.
UK housing market loses momentum
Data from Halifax and RICS pointed to slowing activity in September. The Halifax House Price Index unexpectedly fell 0.3% after a 0.2% rise in August. Analysts had expected another modest increase.
Despite the pullback, prices remain 0.3% higher year to date. The RICS survey showed buyer demand remained weak, though the price balance improved slightly to –15 from –18, suggesting a tentative stabilization.
France faces political turmoil
French Prime Minister Sébastien Lecornu resigned after President Emmanuel Macron’s newly appointed cabinet was rejected by opposition parties, marking one of the shortest-lived governments under the Fifth Republic. The far-right National Rally (RN) leader Jordan Bardella called for the dissolution of parliament and fresh elections, adding further political uncertainty.
Japan
Markets surge as political transition lifts sentiment
Japanese equities rallied strongly as investors reacted positively to Sanae Takaichi’s victory in the Liberal Democratic Party (LDP) leadership race, positioning her as the likely next prime minister. The Nikkei 225 climbed 5.07%, and the TOPIX gained 2.19%, driven by expectations of fiscal expansion and continued monetary support.
The yen weakened to JPY 152.8 per USD, down from JPY 147.5, as markets anticipated pro-growth stimulus.
However, late Friday, the Komeito Party withdrew from the coalition, citing policy disagreements and governance concerns, raising doubts over Takaichi’s ability to form a stable government.
Bond yields climbed slightly, with the 10-year JGB rising to 1.69%, its highest since 2008, amid speculation of large-scale fiscal spending. On monetary policy, Takaichi refrained from expressing a stance on interest rate hikes, while investors expect the Bank of Japan to maintain its accommodative policy for now.
Wage data showed a 1.5% year-over-year increase in August, below expectations, and real wages declined for the eighth consecutive month. Household spending, however, rose 2.3%, beating forecasts.
China
Muted Golden Week consumption; policy focus ahead of plenum
Mainland Chinese markets posted mixed results in a holiday-shortened week. The CSI 300 Index slipped 0.51%, while the Shanghai Composite rose 0.37%. The Hang Seng Index in Hong Kong lost 3.13%.
Preliminary Golden Week data indicated slower consumer activity than during May’s Labor Day holiday. Retail and restaurant sales grew 3.3%, roughly half the earlier pace, while overall passenger travel increased 6.2% year over year, below May’s 8%.
The soft data highlight Beijing’s ongoing challenge in stimulating domestic consumption as the economy pivots from exports toward services. Investors are now watching the Fourth Plenum (October 20–23), where officials are expected to outline the next Five-Year Plan and potential policy adjustments for economic rebalancing.
Other Key Markets
Philippines — Central bank cuts rates amid benign inflation
The Bangko Sentral ng Pilipinas reduced its Target Reverse Repurchase Rate from 5.00% to 4.75%, marking the latest in a series of gradual rate cuts since mid-2024.Officials cited benign inflation, stable expectations, and moderating domestic demand as justification for a more accommodative stance.
They warned that electricity tariffs and rice import duties could still pose upside inflation risks but emphasized that current conditions “provide room to support growth.”
Poland — Third rate cut as inflation outlook improves
Poland’s central bank lowered its reference rate by 25 basis points to 4.50%, its third cut since June. Policymakers noted that inflation held steady at 2.9%, with core inflation near the same level.
They cited an improving inflation outlook and slowing wage growth as key reasons for easing policy, while acknowledging weaker economic activity across the EU and U.S.
