InvestMacro

The Dow Jones (US30) Index ended Tuesday down by 0.20%. The S&P 500 (US500) dropped 0.38%. The technology-heavy Nasdaq (US100) closed lower by 0.67%. The prolonged government shutdown continues to cloud the economic outlook, delaying the release of key data and putting pressure on policymakers to reach an agreement. Indices were also weighed down by a sharp sell-off in Oracle shares following weaker-than-expected reports on cloud segment margins. Tesla fell by 4.4% after presenting a lower-cost Model Y, Ford plunged 7.6% due to a supplier’s fire, and gold futures jumped above $4,000 per ounce as investors sought safe-haven assets. In the absence of new economic data, investors relied on secondary indicators and Federal Reserve statements, which pointed to a potential rate reduction amid the uncertainty.

The US consumer inflation expectations for the coming year rose to 3.4% in September 2025, the highest reading in five months, up from 3.2% in August. Meanwhile, five-year inflation expectations also increased from 2.9% to 3.0%, while three-year expectations remained at 3.0%. Unemployment expectations climbed 2.0 percentage points to 41.1%.

The Ivey Canadian Purchasing Managers’ Index (PMI) surged to 59.8 in September 2025 from 50.1 in August, hitting a 16-month high and beating market expectations of 51.2. The employment level also improved (50.2 vs. 46.0). Canada’s trade deficit widened to C$6.3 billion in August 2025, up from C$3.8 billion the previous month and significantly exceeding market expectations of C$5.6 billion, making it the second-largest trade deficit on record. Exports shrank by 3% month-over-month to C$60.6 billion, the first drop since April, extending a period of volatility that began after the US tariff threat and implementation. In turn, imports grew by 0.9% to C$66.9 billion, driven by a more than 500% surge in purchases of gold, silver, and platinum-group metals, which offset earlier declines this year due to tariff uncertainty.

Equity markets in Europe rose slightly yesterday. Germany’s DAX (DE40) edged up by 0.03%, France’s CAC 40 (FR40) closed higher by 0.04%, Spain’s IBEX35 (ES35) slipped 0.19%, and the UK’s FTSE 100 (UK100) closed up 0.05%.

The US natural gas prices jumped more than 2.5% on Tuesday to $3.45/MMBtu, nearing the 11-week high of $3.476 reached on October 1st, amid a drop in daily production. Output in the US 48 states averaged 106.5 billion cubic feet per day (bcfd) in October, down from September’s 107.4 bcfd and the record high of 108.0 bcfd in August.

Asian markets traded mixed yesterday. Japan’s Nikkei 225 (JP225) edged up by 0.01%, China’s FTSE China A50 (CHA50) and Hang Seng (HK50) did not trade yesterday, and Australia’s ASX 200 (AU200) posted a negative result of 0.27%.

The Reserve Bank of New Zealand (RBNZ) cut the Official Cash Rate (OCR) by 50 basis points to 2.5%, exceeding market expectations for a 25 basis point reduction, bringing the borrowing cost to its lowest level since mid-2022. Policymakers cited persistent spare capacity, subdued domestic activity, and downside risks from cautious household and business behavior that could slow the economic recovery, prompting them to implement a more significant easing. Inflation also remains near the upper bound of the 1-3% target band but is expected to return to the 2% midpoint by mid-2026 as tradable goods pressures ease. The committee remains prepared to ease policy further to anchor inflation near the 2% target.

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.