Market sentiment stayed negative early Wednesday as Asian equities saw their steepest daily drop in six months, following Wall Street’s slump. Key drivers included concerns over the U.S. Federal Reserve’s (Fed) possible pause on rate cuts, U.S.-driven global trade tensions, and renewed geopolitical risks amid a quiet economic calendar. A cautious mood ahead of top-tier U.S. data — the ADP Employment Change and the ISM Services PMI — also weighed on risk appetite, even as Treasury bond yields pulled back.
The New York Times reported that the Trump administration is considering military action against Venezuela and potential seizures of its oil fields. Meanwhile, South Korean intelligence warned that North Korea may be close to conducting a nuclear test.
Major U.S. stock indices fell sharply, with the NASDAQ down 2.04%, the S&P 500 losing 1.17%, and the Dow Jones Industrial Average dropping 0.53%. Sentiment was hurt by lingering concerns from last week’s Fed meeting, the ongoing government shutdown, overvaluation fears, and Bitcoin sliding below the $100,000 level.
Asian markets mirrored the selloff, with a tech-led rout dominating regional trading. Japanese equities suffered their steepest decline in over six months, led by technology shares. South Korea’s Kospi Index dropped as much as 4.8%, breaking below the 4,000 mark and extending its two-day fall to 7%, the sharpest since August 2024.
Chinese Premier Li’s remarks reaffirmed Beijing’s stance as a defender of multilateral trade amid rising global tariffs. His commitment to expanding imports and reforming trade governance signalled efforts to stabilise relations with major partners, though tensions with the U.S. persist.
Later in the session, losses eased after Beijing announced tariff adjustments, suspending 24% U.S. tariffs and maintaining 10% for a year, while halting additional duties on some U.S. imports from November 10. This news helped improve market sentiment ahead of key U.S. data releases. Meanwhile, China’s RatingDog/S&P Global Services PMI slipped to 52.6 in October, a three-month low, as export orders fell and employment declined.
After-market results from Advanced Micro Devices (AMD) also boosted confidence, as the company beat Q3 estimates with strong revenue and profit guidance.
The ongoing U.S. government shutdown has now become the longest in history. Analysts expect it to end soon, noting that markets could rally once it is resolved. Signs of progress include a bipartisan compromise proposal reported by Axios, warnings from the U.S. Transport Secretary about possible airspace closures, and concerns over SNAP benefits ending for 40 million Americans. Trump’s rising disapproval rating and reports from the Wall Street Journal suggesting Senate optimism about a deal have further strengthened hopes that the shutdown could end by the weekend.
In Japan, the Bank of Japan’s (BoJ) September meeting minutes showed policymakers maintaining a cautious approach to normalisation, citing uncertainty over U.S. tariffs and global trade. While views differed on timing, officials agreed that underlying inflation is broadening and that tariff impacts are smaller than feared.
The Swiss Franc gained after Trump mentioned “progress” in trade talks with Swiss officials, hinting at potential relief in the U.S.–Swiss tariff dispute.
Canada’s fiscal update, released Tuesday evening, showed Ottawa widening its deficit forecast and projecting a debt-to-GDP ratio above 43%, despite easing borrowing. The C$78.3 billion deficit for 2025/26 and C$65.4 billion for 2026/27 are roughly double earlier estimates, and together with weaker growth projections, weighed modestly on the Canadian Dollar (CAD).
In oil markets, private-sector data revealed a 6.5 million-barrel crude build — far above expectations — even as gasoline and distillate inventories posted larger-than-expected draws.
New Zealand’s labour market weakened further, with Q3 unemployment rising to 5.3%, flat employment growth, and participation slipping to 70.3%. Wages rose 0.5% quarter-on-quarter, keeping the New Zealand Dollar (NZD) under pressure. The Reserve Bank of New Zealand (RBNZ) Financial Stability Review noted that financial risks remain heightened, while NZDUSD hit new lows.
The U.S. Dollar Index (DXY) hovered near a three-month high after a five-day winning streak, allowing EURUSD and GBPUSD to stabilise at multi-week lows. USDJPY remained under pressure as the Japanese Yen (JPY) benefited from safe-haven demand and mixed BoJ sentiment. AUDUSD rebounded from a two-week low, logging its first daily gain in six sessions, while NZDUSD recovered from a seven-month low. USDCAD stayed firm for a fifth day, reaching a seven-month high.
Crude oil paused after ending a two-day rally, while gold prices steadied after a three-day drop, lacking strong upward momentum. Bitcoin (BTC) and Ethereum (ETH) also rebounded slightly from mid-2025 lows after two days of heavy losses.
EURUSD halted its six-day slide, rebounding from its lowest level since early August as traders awaited key data, including the final October PMIs, September’s Producer Price Index (PPI), German Factory Orders, and several statements from European Central Bank (ECB) policymakers. Attention also turned to the U.S. ADP Employment Change and ISM Services PMI for October. Hopes of an imminent end to the U.S. government shutdown, stronger-than-expected results from Advanced Micro Devices (AMD), and upbeat comments from ECB officials further supported the Euro in trimming recent losses.
GBPUSD moved in line with other major currencies as the U.S. Dollar pulled back, while caution ahead of the United Kingdom’s November 26 fiscal event — amid fears of major spending cuts — combined with the U.S. Federal Reserve’s (Fed) hawkish stance to keep bearish sentiment intact before key U.S. data.
At the same time, the Bank of Japan’s (BoJ) less eventful meeting minutes and uncertainty over future rate hikes limited downside momentum for USDJPY, even as bears held control for a second straight day. The Japanese Yen’s traditional safe-haven appeal and concerns over U.S.–Japan trade relations also influenced the pair’s movement.
Market positioning ahead of key U.S. data, combined with news of China’s fresh stimulus measures, Beijing’s reduction of U.S. tariffs, and progress in Sino-American trade talks, helped the Australian, New Zealand, and Canadian Dollars pause their previous declines against the U.S. Dollar. However, the Canadian Dollar (CAD) struggled to recover as Canada’s widening deficit forecasts, weaker Oil prices, and renewed fears of a U.S.–Canada trade dispute limited gains. Mixed economic data from New Zealand also capped the NZDUSD’s rebound from its lowest level since April. As a result, AUDUSD bounced from a two-week low, while USDCAD extended its five-day uptrend, though with subdued upside momentum.
Gold paused its three-day losing streak after recording its biggest weekly drop in the previous session, while Crude Oil held slightly higher after ending a two-day rally, despite a surprise increase in U.S. oil inventories reported by industry data. Hopes of additional Chinese stimulus, progress in U.S.–China trade relations, and rising geopolitical tensions also supported demand for both gold and crude oil, especially as U.S. Treasury bond yields retreated.
Bitcoin (BTC) and Ethereum (ETH) ended their two-day losing streak after steep declines on Monday and Tuesday, though their recovery lacked strength amid caution ahead of key U.S. data and a lack of major positive news from the crypto industry.
Meanwhile, Asia-Pacific equities suffered their sharpest daily drop in months, following Wall Street’s weak performance. However, share market losses eased later in the session, supported by positive news from Advanced Micro Devices (AMD) and China.
Looking forward, the U.S. ADP Employment Change and ISM Services PMI, as well as the final readings of the S&P Global PMIs for October, will be the key to watch for market players, especially amid the lack of U.S. data due to the shutdown and growing concerns that the Fed will stop rate cuts in December.
If the scheduled data arrives strongly, the USD can extend its latest run-up and help the US Treasury bond yields to also rebound. This could exert additional downside pressure on cryptocurrencies, but the U.S. equities may not decline much and can rebound as the AMD news joins China tariff announcements.
Elsewhere, EURUSD may not recover much even if the EU data arrive strongly, amid looming concerns over the Fed rate inaction and trade/political tensions in the Eurozone. On the same line, other major currencies and Antipodeans can also extend their latest losses following the U.S. data, if any. However, the Gold prices can rebound if the risk sentiment improves.
May the trading luck be with you!
