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Markets rattled as US-China trade tensions intensify

Major equity markets recorded steep losses at the end of last week and into Monday as renewed tariff threats from US President Donald Trump and China’s response reignited global trade worries. Asian indices were sharply lower, while US benchmarks closed out Friday heavy losses, accompanied by a surge in market volatility. Oil prices rebounded early Monday as Trump softened his stance, yet market sentiment remains cautious amid geopolitical uncertainties and a continuing US government shutdown. While equity markets were under pressure, gold (USD 4070 per ounce) and bitcoin (USD 115,000) bounced back at the start the week. US Treasury yields moved in mixed fashion, with the two-year yield at 3.5%, the ten-year yield below 4.1%. Investors will begin shifting their focus to the start of the third-quarter earnings season on Tuesday.

  • Date
  • Auteur Shane Strowmatt, Senior Investment Writer
  • Temps de lecture 5 minutes

Asia-Pacific markets fell sharply on Monday as renewed trade frictions between China and the United States prompted investors to reduce risk. The Hang Seng Index in Hong Kong plummeted 2.9%, while mainland China’s CSI 300 was down 1.5%. These declines followed Trump’s announcement of plans for additional 100% tariffs on Chinese imports after China expanded export controls on rare earth minerals. In turn, China stated it is prepared for a trade war. Despite the tensions, China’s exports in September rose by 8.3% year-on-year, beating forecasts and marking the fastest pace in six months, while imports achieved their strongest growth in over a year, even as the prospect of a trade agreement remains uncertain. Elsewhere in the Asia-Pacific region, Korea’s Kospi fell 1.5% and Australia’s S&P/ASX 200 slipped 0.8%. Japanese markets were closed on Monday for a public holiday.

US stocks slump amid renewed China tensions

US stock markets recorded sharp declines on Friday as intensifying trade concerns between the United States and China abruptly ended the recent rally, especially among technology shares. The Dow Jones Industrial Average fell by 1.9% to 45,479.60 points, posting a 2.7% loss for the week, which marks the largest weekly drop since the beginning of August; the S&P 500 lost 2.7% to close at 6552.51 points, while the Nasdaq Composite dropped 3.6% to 22,204.43 points. The CBOE Volatility Index - a gauge of investor fear - shot up 31.8% to 21.66 points. Technology heavyweights saw notable declines, with tech giants losing USD 770 billion in market capitalization during the session. Adding to the downbeat market mood was the University of Michigan’s consumer sentiment index, which was little changed in October, recording a reading of 55 compared with 55.1 in September. The index is now 22% lower than a year earlier as Americans remain concerned about persistent inflation, weak job prospects and ongoing political uncertainty, including a federal government shutdown.

Earnings season takes spotlight amid US shutdown

With US government shutdown still delaying the release of crucial economic indicators, markets turn to third-quarter earnings season for guidance this week. Tuesday marks the traditional start, as major US banks including Citigroup, Goldman Sachs, JPMorgan, and Wells Fargo unveil results. On Wednesday, Bank of America, Morgan Stanley, PNC Financial, and ASML follow. European investors will watch closely as inflation figures from Germany (Tuesday), France (Wednesday), Spain (Wednesday), Italy (Thursday) and the euro area (Friday) trickle out, while UK labour market (Tuesday) and gross domestic product (Thursday) data round out the week. In Asia, Chinese inflation data (Tuesday) complement Monday's trade data to offer a snapshot of regional momentum.

Swiss consumer sentiment improves in September

Swiss consumer sentiment edged up in September, with the Seco index rising to minus 36.5 points from minus 39.9 in August, according to data released on Friday. This modest rebound follows two consecutive monthly declines, though sentiment remains well below its long-term average and stands 2.8 points lower than in September of last year. The improvement was mainly driven by more optimistic views regarding the expected economic outlook. European stocks recorded broad losses on Friday, with Swiss stocks falling less than other markets in the region. The Swiss Market Index retreated by 1% to 12,481.41 points. The Euro Stoxx 50 finished 1.7% lower, Germany’s DAX slid 1.5%, and France’s CAC 40 lost 1.5%.

Oil prices rebound as Trump softens stance

Brent crude futures climbed 1.4% to almost USD 64 per barrel and West Texas Intermediate rose 1.4% as well to nearly USD 60 per barrel in Asian trading on Monday, recovering from large declines on Friday after Trump announced plans for additional 100% tariffs on Chinese imports. Prices rebounded after Trump signalled a more conciliatory approach over the weekend, reassuring markets that negotiations with China could continue. Despite the recovery, oversupply risks persist as US crude production is expected by the Energy Information Administration to reach a record 13.53 million barrels per day in 2025, and OPEC+ is set to raise output by 137,000 barrels per day in November. A ceasefire agreement between Israel and Hamas, also brokered by Trump, further eased geopolitical tensions weighing on oil prices.

Canada sees sharp rise in September job gains

Canada added 60,400 jobs in September, largely offsetting declines from the previous month, according to figures released on Friday. The unemployment rate remained unchanged at a nine-year high of 7.1%, with youth unemployment climbing to a 15-year peak of 14.7%. While full-time roles led the employment increase and the manufacturing sector registered its first growth in job numbers since January, persistent low hiring and slack in the labour market reflect underlying economic pressures linked to US tariffs. The market expects the Bank of Canada to consider a further rate cut later this month to support the economy, following its quarter-point reduction in September.

Corporate and economic calendar

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: OPEC Monthly Report (13:00).

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Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.