Global Markets Slide as Trade Tensions Escalate, Gold Surges to Record Highs | Weekly Market Analysis

Key events this week:

Tuesday, October 14, 2025

• USA - Fed Chair Powell Speaks        

Wednesday, October 15, 2025

• USA - Core CPI (MoM) (Sep)
• USA - CPI (YoY) (Sep)
• USA - CPI (MoM) (Sep)

Thursday, October 16, 2025

• UK - GDP (MoM) (Aug)
• USA - Core Retail Sales (MoM) (Sep)
• USA - Initial Jobless Claims
• USA - Philadelphia Fed Manufacturing Index (Oct)
• USA - PPI (MoM) (Sep)
• USA - Retail Sales (MoM) (Sep)
• USA - Crude Oil Inventories

Friday, October 17, 2025

• Eurozone - CPI (YoY) (Sep)
• USA - Average Hourly Earnings (MoM) (Sep)
• USA - Nonfarm Payrolls (Sep)
• USA - Unemployment Rate (Sep)

Global markets tumbled sharply on Friday, with the S&P 500 recording its steepest one-day loss since April after renewed tensions between the United States and China reignited fears of another trade war. The sell-off was triggered by President Donald Trump’s warning of a “massive increase” in tariffs on Chinese imports following Beijing’s move to restrict exports of rare earth metals - a vital component for technology and defense industries.

The benchmark S&P 500 fell 2.7%, the Nasdaq Composite dropped 3.6%, and the Dow Jones Industrial Average shed 840 points, or 1.9%, as investors rushed to cut risk exposure amid escalating uncertainty.

In a post on his social media platform, Trump said that his administration was considering retaliatory measures to counter China’s actions, including sharply higher tariffs on Chinese goods entering the United States. He added that several other countermeasures were under “serious consideration.” The statement immediately sparked a wave of risk aversion, with investors turning to traditional safe-haven assets while cutting positions in equities and growth-linked currencies.

Gold, a classic refuge in times of market turmoil, continued its rally into Monday’s Asian session. The metal extended gains for the second consecutive day, surging to a fresh all-time high near $4,060 per ounce. The combination of renewed trade tensions, lingering concerns about a prolonged US government shutdown, and expectations of further Federal Reserve interest rate cuts supported demand for the non-yielding asset. Market participants are increasingly pricing in the possibility of at least two additional rate cuts this year, a factor that has weakened the US dollar and boosted precious metals.

The Japanese yen, another traditional safe-haven currency, failed to capitalize on broader market caution. Despite Friday’s modest rebound from multi-month lows, the yen remained under pressure amid ongoing political uncertainty in Japan and diverging monetary policies between the Bank of Japan and the Federal Reserve. The USD/JPY pair struggled to build momentum above 152.00, as thin liquidity due to public holidays in both Japan and the United States limited volatility. Market sentiment, however, remains cautious as speculation grows that Japanese authorities could step in to curb further yen depreciation.

Elsewhere in the Asia-Pacific region, the New Zealand dollar gained modestly to trade near 0.5740 during the Asian session. However, analysts warn that the Reserve Bank of New Zealand’s dovish stance could weigh on the currency in the longer term. The RBNZ recently slashed its benchmark interest rate by 50 basis points and signaled room for further easing, with markets now pricing in another 25-basis-point reduction at the November meeting.

The Australian dollar also edged higher after steep losses last week, hovering around 0.6530. The move came despite renewed trade concerns following China’s latest trade balance data, which showed a narrowing surplus as both exports and imports rose faster than expected in September. Australia’s government, meanwhile, is reportedly in talks with miners about contributing to a 1.2-billion-Australian-dollar critical minerals reserve aimed at supporting new rare-earth projects. The proposal - part of a broader strategic partnership with the United States - includes potential price floors for critical minerals and financial incentives for domestic production, underscoring the growing geopolitical significance of resource security.

In Europe, the euro steadied around 1.1620 against the dollar after gaining nearly 0.5% in the previous session. Easing political tensions in France helped lift sentiment after President Emmanuel Macron confirmed plans to appoint a new prime minister, following the resignation of Sebastien Lecornu. Markets welcomed the news, interpreting it as a sign of political stability and continuity. The European Central Bank’s recently released meeting minutes also showed policymakers’ confidence that current interest rates remain appropriately restrictive to keep inflation on a path toward the 2% target. The minutes indicated that while inflation risks persist, members agreed that policy should stay steady for now to assess the impact of previous rate hikes.

The Canadian dollar traded with a slightly positive tone, supported by firm oil prices and upbeat domestic employment data. The USD/CAD pair remained just above the 1.4000 psychological level but showed little momentum as investors awaited fresh catalysts. Crude oil prices opened the week with a mild rebound, recovering part of last week’s losses after President Trump softened his tone on tariff escalation, which temporarily eased fears of a deeper US–China trade confrontation. Additional support for the loonie came from Canada’s latest labor market report, which showed an unexpected gain of more than 60,000 jobs in September, suggesting resilience in the broader economy despite global headwinds.

The British pound, on the other hand, traded slightly lower near 1.3345 as investors remained cautious ahead of upcoming UK employment data. The Bank of England’s external member, Catherine Mann, is scheduled to speak later Monday, and her comments will be closely monitored for hints about the central bank’s future policy stance. The market also remains wary ahead of the Autumn Statement expected in late November, where Chancellor of the Exchequer Rachel Reeves may announce further tax hikes to manage the UK’s growing fiscal deficit. Any new measures to tighten household budgets could weigh on consumer sentiment and slow growth, further pressuring the currency.

Looking ahead, traders will closely follow key macroeconomic releases and political developments that could further shape market sentiment. The ongoing dispute over rare earth metals has underscored the fragility of global supply chains and the extent to which geopolitics continues to influence financial markets. With the Federal Reserve expected to maintain an accommodative policy stance, attention will turn to upcoming inflation and employment data to gauge whether rate-cut expectations are justified.

The broader narrative remains one of heightened uncertainty. Renewed trade frictions between the world’s two largest economies, combined with persistent inflation risks and uneven growth across major regions, have created a volatile backdrop for global investors. For traders, such an environment demands flexibility and vigilance - following real-time economic news and updates on currency, commodity, and stock movements can provide an edge in anticipating shifts in sentiment.