Market sentiment is mixed as a lack of recent U.S. economic data raises doubts about the health of the world’s largest economy. Policymakers are attempting to mask economic pain, but the uncertainty is compounded by dovish Federal Reserve (Fed) expectations and mixed economic indicators. Several Fed officials have endorsed two 0.25% rate cuts for 2025, while private institutions using partial data suggest the economy is stable.
Geopolitical tensions are adding to the market's volatility. Trump’s remarks reignited fears of a prolonged U.S.-China trade war, with both countries taking hard stances. China has expressed dissatisfaction with the U.S. highlighting Beijing’s export curbs on rare earth metals, while Trump also held talks with Russia, hinting at potential peace talks and trade benefits. Meanwhile, concerns over mass layoffs in the U.S., shutdown risks, and the fragile peace in Gaza and Iran's nuclear ambitions weigh heavily on sentiment.
In Europe, the French government survived two no-confidence motions, easing some political fears. In Japan, political uncertainty remains as the ruling party elected its first female leader, though her path to becoming prime minister faces significant challenges.
Trump’s comments on the U.S.-China trade conflict were quoted by Bloomberg, with the former president confirming the ongoing trade war. U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer warned that China's coercive tactics could harm both economies and drive decoupling.
The Philadelphia Fed Manufacturing Index for October dropped to a six-month low of -12.8, far below expectations.
Richmond Fed President Thomas Barkin highlighted shifts in the job market, supporting dovish policies. Meanwhile, Fed Governors Christopher Waller and Stephen Miran backed expectations for a 25-basis-point rate cut at the upcoming meeting. Minneapolis Fed President Neel Kashkari expressed confidence that the economy may be stronger than expected, with limited risk of a major slowdown, aligning with the market's expectation for measured rate cuts rather than aggressive easing.
JPMorgan and Goldman Sachs estimate the U.S. Jobless Claims fell to around 217k despite shutdown-related data gaps, while Bank of America stated that small-business hiring continues to slow.
In geopolitics, the White House reported positive progress from Trump’s call with Putin, with plans for further discussions in Budapest. Meanwhile, the U.S. military carried out a strike in the Caribbean against a suspected drug vessel.
On the global front, China increased its purchase of Canadian crude, signaling its shift away from U.S. oil amidst ongoing trade tensions. Japan’s political scene remains volatile, with Sanae Takaichi elected as the first female leader of the ruling Liberal Democratic Party, though her path to the prime minister faces obstacles.
Against this backdrop, the U.S. equities ended lower, with the Russell 2000 falling over 2%, reflecting broader market concerns. The S&P and Dow each dropped around 0.6%, with financials taking the hardest hit.
The U.S. Dollar Index (DXY) reached a weekly low after five consecutive days of losses, while gold continued its rally, hitting fresh all-time highs daily. Meanwhile, crude oil dipped to a new 5.5-month low, and cryptocurrencies stalled in their recovery after a three-day losing streak.
EURUSD benefits from a double advantage: a weaker U.S. Dollar and easing political tensions in France. The Euro gained for the fourth consecutive day, reaching a weekly high.
Similarly, GBPUSD climbed, buoyed by the softer USD, despite market concerns ahead of the UK’s November budget and mixed economic data. The pair extended its four-day winning streak, hitting a fresh weekly high.
On the other hand, USDJPY dropped to its lowest level since October 6, continuing its four-day decline. The Japanese Yen’s safe-haven appeal, coupled with the ongoing political deadlock in Japan over the PM selection, contributed to the drop in the pair.
AUDUSD drops for the second consecutive day, reflecting its risk-barometer status and increasing expectations for an RBA rate cut. This follows downbeat Aussie employment data and a dovish speech from the RBA Governor. Despite news of China’s stimulus measures, the Australian Dollar remains under pressure.
NZDUSD, on the other hand, benefits from a softer USD, extending its three-day uptrend, and ignores broader risk-off catalysts.
Meanwhile, USDCAD stays within a four-day trading range as a weaker USD balances against downbeat crude oil prices, which impact Canada’s key exports. Additional chatter about U.S.-Canada trade deals and China’s rising crude imports from Canada is adding to the mixed sentiment.
Gold rises for the fifth consecutive day, hitting a new all-time high (ATH), despite a sharp pullback earlier in the day before rebounding by press time. The precious metal benefits from a softer USD, global economic and geopolitical uncertainty, and rumors of tight supply coupled with strong physical demand in India and China. Additionally, rising central bank and ETF demand from major global economies is driving prices higher.
WTI crude oil dropped to its lowest level since early May, pressured by a firmer USD, growing concerns over the U.S.-China trade war, a surprise build in U.S. weekly inventories (per both EIA and API reports), and worries about energy demand. Additionally, expectations of increased OPEC+ supply, potential output boosts from the Middle East, and rumors of easing tensions in Gaza and the U.S. possibly helping Iran return to the market added to the bearish sentiment.
U.S. equities began the trading day on a positive note, supported by strong Q3 earnings from major financial companies. However, after-hours trading saw declines in Novo Nordisk and Eli Lilly after President Trump commented on pushing for price cuts on weight-loss drugs, which pressured the sector. By the close, all major U.S. indices moved lower, with the Russell 2000, which tracks small-cap stocks, faring the worst, dropping over 2%. The S&P and Dow each fell by around 0.6%, whereas the Nasdaq fell by 0.47%. Among the S&P components, financials were the weakest sector, while information technology was the only one to show gains.
Meanwhile, cryptocurrencies continued their decline for the third consecutive day, hitting weekly lows by press time. Traders are awaiting further clues amid the ongoing U.S. shutdown, and institutional ETF demand remains weak.
With the U.S. shutdown causing a data gap, only U.S. Industrial Production and a few private reports are due for release, stalling the economic calendar. However, the market will focus on headlines about the Trump administration's efforts to permanently fire multiple Federal workers during the shutdown, as opposition lawmakers try to block these moves in Congress. Additionally, U.S.-China trade tensions, talks on U.S.-Russia relations, Trump’s ability to stop the Russia-Ukraine war, and concerns over the dovish Fed will also capture market attention.
Amid these uncertainties, the U.S. Dollar is expected to remain pressured, which, combined with gold’s safe-haven status, could continue driving XAU/USD toward fresh all-time highs (ATH). However, exhaustion among buyers could trigger a healthy pullback if the U.S. Dollar sees a corrective bounce, especially as markets position ahead of next week’s U.S. inflation data.
Among major currencies, the EUR, GBP, and JPY could remain relatively firm, but the Antipodean currencies may struggle to benefit from the softer USD. Meanwhile, equities may edge lower due to broader economic concerns, and cryptocurrencies could face another downbeat week.
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