InvestMacro

The Dow Jones (US30) Index ended Monday down by 0.14%. The S&P 500 (US500) gained 0.36%. The technology-heavy Nasdaq (US100) closed higher by 0.78%. Indices continue to rally amid the artificial intelligence boom, despite the US government being in a shutdown for the second consecutive week. AMD shares surged by 23.7% after the announcement of a multi-year deal to supply AI chips to OpenAI, with an option to acquire up to a 10% stake in AMD, fueling optimism for broader M&A activity.

US President Donald Trump stated on Monday that a 25% tariff will be imposed on all medium and heavy-duty trucks imported into the US starting November 1st. Last month, Trump announced that new tariffs would be placed on heavy-duty truck imports starting October 1st for national security reasons, saying the duties were intended to protect manufacturers from “unfair foreign competition.” Under trade agreements with Japan and the EU, the US agreed to a 15% tariff on passenger vehicles, but it remains unclear if this rate will apply to larger vehicles. The Trump administration also allowed manufacturers to deduct the value of US-made components when calculating tariffs on light vehicles assembled in Canada and Mexico.

Equity markets in Europe were mostly lower yesterday. Germany’s DAX (DE40) edged down by 0.01%, France’s CAC 40 (FR40) closed lower by 1.36%, Spain’s IBEX35 (ES35) dropped 0.18%, and the UK’s FTSE 100 (UK100) closed down 0.13%. European stock indices mostly closed lower on Monday as renewed political turmoil in France sparked fresh concerns over financial instability across major Eurozone economies. Markets were shaken by the resignation of Prime Minister Lecornu, as the French parliament remained opposed to spending cuts in the country’s budget, just weeks after he took office and the day after President Macron unveiled a new cabinet. French banks and insurance companies fell sharply as the drop in OATs (French government bonds) put pressure on their balance sheets and raised their liquidity metrics, with BNP Paribas falling 3.5% and AXA dropping 2.5%.

WTI crude oil prices rose by 1.3% to $61.7 per barrel on Monday after OPEC+ agreed to a smaller-than-expected production increase, easing concerns about a significant supply surge. The group announced it would only raise output by 137,000 barrels per day in November, matching the October increase, despite earlier reports of a much larger hike. This restrained decision came amid internal disagreements within the alliance, with Moscow advocating for a moderate increase to protect prices, while Riyadh pushed for a more aggressive expansion to regain market share. Prices were further supported by reports of a fire and a drone attack that led to the shutdown of the Russian Kirishi oil refinery, heightening fears of supply disruptions.

Asian markets traded mixed yesterday. Japan’s Nikkei 225 (JP225) surged 4.75%, China’s FTSE China A50 (CHA50) did not trade yesterday, Hong Kong’s Hang Seng (HK50) fell by 0.67%, and Australia’s ASX 200 (AU200) posted a negative result of 0.07%.

The Nikkei 225 (JP225) Index climbed above 48,200, and the broader Topix Index rose to 3,240 on Tuesday, with both indices hitting new record highs after Sanae Takaichi, a proponent of soft fiscal policy and economic stimulus, won the leadership of the ruling Liberal Democratic Party over the weekend, positioning her as Japan’s next prime minister. Takaichi is expected to press the Bank of Japan to maintain its ultra-easy monetary policy, which is leading to a sharp decline in the yen’s value.

The Australian dollar climbed to around $0.661 on Tuesday, marking its third consecutive session of gains, as markets scaled back expectations for a near-term policy easing by the Reserve Bank of Australia. RBA Governor Michele Bullock recently indicated that rates are likely to remain on hold as persistent consumer spending and inflation, particularly in housing and services, reduce the need for cuts. Investors are now pricing in only a 40% chance of a 25 basis point rate cut in November, down from near-certainty a month ago. On the economic front, the Westpac-Melbourne Institute Index of Consumer Sentiment fell 3.5% month-over-month to 92.1 in October, the steepest contraction since April, reflecting growing household concerns over sustained inflation.

The New Zealand dollar slipped to around $0.584 on Tuesday as investors anticipated looser monetary policy from the Reserve Bank. Markets have fully priced in a 25 basis point rate cut on Wednesday, with growing bets on a more significant 50 basis point reduction. Expectations for deeper easing were supported by weak business sentiment survey results, which suggest the economy may have contracted again in the third quarter, increasing the risk of a renewed recession.

At the close on Wednesday, the Dow Jones (US30) rose by 0.09%. The S&P 500 (US500) gained 0.34%. The technology-heavy Nasdaq (US100) closed 0.42% higher. Wall Street indices closed at record highs on Wednesday, driven by strong sectoral performance and optimism that the US government shutdown would be short-lived. The ADP report showed a contraction of 32,000 private-sector jobs in September, signaling a slowing labor market, while activity at American factories continued to contract for the seventh straight month. Overall, strong performance in specific sectors, particularly healthcare, and confidence that the economic impact of the shutdown would be limited, helped lift US equities to record levels.

The ISM Manufacturing PMI for the US rose to 49.1 in September 2025, up from 48.7 in August, slightly exceeding market expectations of 49.0. The reading marked the seventh consecutive month of contraction. Survey respondents cited tariffs, high costs, and weak demand as key issues, with many halting capital projects, cutting spending, and facing delayed orders, particularly in the machinery, metals, and semiconductor sectors.

In Canada, the Manufacturing PMI fell to 47.7 in September 2025 from 48.3 in August, continuing to reflect a contraction in activity at Canadian firms. This was the eighth consecutive month of decline in manufacturing, impacted by a series of US tariffs on Canadian goods and retaliatory domestic duties. Looking ahead, companies continued to cite uncertainty about prospects due to policy changes and tariffs, with business confidence easing from August’s seven-month high and remaining significantly below trend.

European equity markets rose strongly on Wednesday. The German DAX (DE40) climbed 0.98%, the French CAC 40 (FR40) closed 0.90% higher, the Spanish IBEX35 (ES35) gained 0.41%, and the UK FTSE 100 (UK100) closed up 1.03%. European indices extended their rally, closing higher on Wednesday, boosted by healthcare stocks, which received investor support related to tariffs. Shares of Merck jumped 10.1%, Bayer added 5%, Fresenius Medical Care gained 1.4%, and Siemens Healthineers rose 0.6%. This followed a deal between Pfizer and the Trump administration allowing patients to access discounted prescription drugs through a new federal platform. Nevertheless, broad market sentiment remained volatile amid ongoing concerns about the US government shutdown. Regarding data, Eurozone inflation rose to 2.2% in September, matching expectations and underpinning the European Central Bank’s (ECB) cautious approach to further rate cuts.

Brent crude oil prices fell below 66 per barrel on Wednesday, hitting their lowest in over three weeks, extending a three-day slide as OPEC+ considers a faster supply increase. The group meets on Sunday to discuss increasing output by 500,000 barrels per day per month for three months, despite projections warning that the market is already oversupplied. The IEA expects a record surplus next year, and TotalEnergies notes market saturation in the first quarter. Still, traders are skeptical that the full OPEC+ production increase will materialize, given Saudi Arabia’s cautious stance on capacity constraints.

Asian markets declined yesterday. Japan’s Nikkei 225 (JP225) fell by 0.85%, China’s FTSE China A50 (CHA50) and Hong Kong’s Hang Seng (HK50) did not trade due to holidays, and the Australian ASX 200 (AU200) posted a negative result of 0.04%.

Australia’s trade surplus fell to 1.83 billion AUD in August 2025, the lowest reading since June 2018 and well below market expectations of 6.2 billion AUD, compared to a downwardly revised 6.61 billion AUD in July. The sharp drop was driven by exports falling to a three-month low, stemming from reduced shipments to the US following new tariffs and a sharp decline in gold exports. Meanwhile, imports rebounded to a record high after falling in July. On the policy front, the Reserve Bank of Australia kept its cash rate at 3.6% earlier this week, with Governor Bullock noting that while some CPI components were slightly higher than anticipated, inflation remains contained.

The Dow Jones Index (US30) ended Tuesday up 0.18%. The S&P 500 Index (US500) gained 0.41%. The technology-heavy Nasdaq Index (US100) closed 0.30% higher. The US stocks closed slightly up on Tuesday, suggesting that investors are shrugging off concerns about a potential government closure.

The US government work stoppage began on Wednesday after the Senate rejected a short-term spending measure, forcing agencies to suspend all but the most essential operations. This move threatens to disrupt air travel, federal services, and the release of key economic data, including the monthly unemployment report. The White House Office of Management and Budget issued a memo confirming that the government would indeed shut down, blaming Democrats for the impasse. Previous shutdowns have cost the US billions of dollars in lost productivity, with federal employees facing unpaid leave or delayed paychecks.

Analysts say the stalemate reflects deep partisan divisions over spending priorities, with no clear way out yet, causing concern for investors and global markets watching the world’s largest economy. Investors also remain cautious amid a slowing labor market, weak consumer confidence, and high stock valuations. The number of job openings in the US increased by 19,000 to 7.227 million in August 2025, compared to an upwardly revised 7.208 million in July, matching market expectations.

The Mexican peso strengthened to 18.3 per US dollar, nearing its strongest level since July 2024 – the 18.29 mark recorded on September 16. Last week, the Bank of Mexico cut its key interest rate by 25 basis points (bps) to 7.50% and termed the move calibrated and conditional, stressing data-dependence and gradual easing, which reassured investors: inflationary risks remain under watch and policy will not sharply change. Mexico’s unemployment rate rose to 2.9% in August, indicating a moderate slowdown but not a deep deterioration.

European equity markets grew solidly on Tuesday. The German DAX (DE40) climbed 0.57%, the French CAC 40 (FR40) closed 0.19% higher, the Spanish IBEX35 (ES35) gained 1.04%, and the UK’s FTSE 100 (UK100) closed up 0.54%. Overnight, the US government was due to shut down, with President Trump threatening massive public sector job cuts amid existing labor market pressure, which led to a worldwide decline in yields in the third quarter. The ECB, by contrast, is set to hold rates until the year-end, as fresh CPI data from Germany, France, and Spain point towards increasing inflation.

On Wednesday, the price of silver climbed above $47 per ounce, hitting a new 14-year high, as the US government shutdown fueled demand for the precious metal as a safe haven after lawmakers failed to reach a temporary funding agreement. The closure will furlough hundreds of thousands of federal employees and halt key services, and traders are now focused on its duration, as a prolonged shutdown could delay the release of critical economic data ahead of the Federal Reserve’s meeting in late October, including Friday’s Nonfarm Payrolls data. The broader adoption of solar energy has further boosted the metal’s appeal, alongside growing demand from consumer electronics and data center manufacturers.

Asian markets traded mixed yesterday. Japan’s Nikkei 225 (JP225) fell by 0.25%, China’s FTSE China A50 (CHA50) declined 0.31% and went on holiday until the end of the week, Hong Kong’s Hang Seng (HK50) gained 0.87%, and Australia’s ASX 200 (AU200) closed down 0.16%.

The Reserve Bank of India (RBI), as expected, left the key repo rate unchanged at 5.50% at its October 2025 meeting. This decision came amid moderating inflation, though concerns intensified after the US introduced 50% tariffs on Indian exports and increased visa fees, sparking fears of broader punitive measures against the services sector. On the economic outlook, the RBI revised its GDP growth expectations for the 2025/26 fiscal year upward to 6.8% from a previous 6.5% projection. Concurrently, projections for headline inflation were lowered from 3.1% to 2.6%.

Indonesia’s annual inflation rate accelerated to 2.65% in September 2025, up from 2.31% in August. This was the highest inflation rate since May 2024, but it remained within the Central Bank’s target range of 1.5% to 3.5%. Core inflation, which excludes regulated and volatile food prices, slightly accelerated to 2.19% in September from August’s 11-month low of 2.17%. On a monthly basis, the Consumer Price Index (CPI) rose by 0.21%.