Q4: Will Japanese assets lead the way?

Key data to move markets today

CHINA: National Day
EU: Sentix Investor Confidence, Retail Sales, and speeches by ECB Executive Board member Philip Lane, ECB Vice President Luis de Guindos, and ECB President Christine Lagarde
UK: BRC Like-For-Like Retail Sales and a speech by BoE Governor Andrew Bailey

US Stock Indices

Dow Jones Industrial Average +0.51%
Nasdaq 100 -0.43%
S&P 500 +0.01%, with 4 of the 11 sectors of the S&P 500 up

US equity markets concluded the week with a mixed performance, as both the Dow Jones Industrial Average and the S&P 500 set new records. The Dow advanced 238.58 points, or +0.51%, to achieve a new all-time high of 46,758.28. The S&P 500 edged up by a marginal +0.01%, which was sufficient to secure its own record close and extend its streak to 114 trading sessions without a 5% pullback. In contrast, the Nasdaq Composite retreated, declining -0.28% on the day. 

For the week, all three major indices posted gains, with the Dow rising +0.95%, the S&P 500 adding +0.82%, and the Nasdaq climbing +0.84%.

On corporate news, Rivian Automotive is reportedly reworking a key element of its vehicle doors after sources indicated that both employees and customers had raised potential safety concerns.

3M is said to be considering the sale of billions of dollars in assets from its industrial operations as it seeks to divest from lower-growth business lines. 

Shares of Applied Materials declined -2.71% following the announcement of a projected $600 million negative impact on its 2026 revenue. 

A research firm's analysis revealed that Huawei Technologies utilised advanced components from leading Asian technology firms in its Ascend line of AI processors.

S&P 500 Best performing sector

Utilities +1.15%, with Pinnacle West Capital +2.61%, Sempra +2.42 %, and Nextera Energy +2.40 %

S&P 500 Worst performing sector

Consumer Discretionary -0.81%, with Las Vegas Sands -7.41%, Wynn Resorts -7.26%, and Nike -3.54%

Mega Caps

Alphabet +0.01%, Amazon -1.30%, Apple +0.35%, Meta Platforms -2.27%, Microsoft +0.31%, Nvidia -0.70%, and Tesla -1.42%

Information Technology

Best performer: Fair Isaac +3.70%
Worst performer: Palantir Technologies -7.47%

Materials and Mining

Best performer: Freeport-McMoRan +2.06%
Worst performer: Dupont De Nemours -1.57%

European Stock Indices

CAC 40 +0.31%
DAX -0.18%
FTSE 100 +0.67%

Commodities

Gold spot +0.78% to $3,885.99 an ounce
Silver spot +2.15% to $47.97 an ounce
West Texas Intermediate +0.10% to $60.69 a barrel
Brent crude +0.12% to $64.38 a barrel

Gold prices advanced on Friday, remaining close to record levels and marking the seventh straight week of gains. This performance reflected rising concerns about a prolonged US government shutdown and increased anticipation of Fed monetary easing. 

Spot gold increased +0.78% to $3,885.99 per ounce, following a record peak of $3,896.49 reached on Thursday. For the week, gold prices rose by +3.36%. 

Widely regarded as a safe haven during periods of uncertainty, gold typically benefits from lower interest rates and has appreciated by +48.09% year-to-date.

Oil prices finished modestly higher on Friday; however, they registered a weekly decline amid reports of a possible increase in OPEC+ supply. Brent crude futures settled 8 cents higher, or +0.12%, at $64.38 per barrel, while US WTI crude rose 6 cents, or +0.10%, to $60.69 per barrel. Despite the gains on the day, Brent crude experienced a -7.61% loss for the week—the largest in over three months—while WTI dropped -6.90%.

The anticipated boost in OPEC+ production, alongside the resumption of flows in the Iraq-Kurdistan pipeline after a two-year suspension, has maintained selling pressure in the crude market. According to a Reuters report, eight OPEC+ member countries are likely to increase output further at their meeting on Sunday, with Saudi Arabia advocating for a significant production hike to reclaim market share and Russia proposing a more moderate approach.

Analysts noted that the prospect of higher OPEC+ supply, coupled with a slowdown in global crude refinery runs due to scheduled maintenance and a seasonal dip in demand, is expected to dampen market sentiment in the coming months. The pipeline from the semi-autonomous Kurdistan region in northern Iraq to Turkey resumed operations on Saturday for the first time in two and a half years, the Iraqi oil ministry announced last week.

In terms of supply, US energy firms kept the number of oil and natural gas rigs largely unchanged last week, according to Baker Hughes. The total rig count, including miscellaneous categories, remained steady at 549 for the week ending 3^rd October, representing a decrease of 36 rigs, or 6.2%, compared to the same period last year. Specifically, oil rigs fell by two to 422, while gas rigs increased by one to 118.

Additionally, a fire occurred overnight at Chevron’s El Segundo refinery, one of the largest facilities on the US West Coast with a capacity of 290,000 barrels per day. According to a county official, the flames were contained to a single area.

Note: As of 5 pm EDT 3 October 2025

Currencies

EUR +0.20% to $1.1741
GBP +0.31% to $1.3478
Bitcoin +1.82% to $122,426.77
Ethereum +1.18% to $4,526.09

The US dollar weakened on Friday, recording multi-week losses against major currencies, as uncertainty regarding a potential government shutdown weighed on market sentiment and led to delays in crucial data releases, including the nonfarm payrolls report essential for assessing the nation's economic trajectory.

The Japanese yen retreated from last week's highs as investors considered possible policy shifts by the BoJ ahead of the ruling party's leadership election scheduled for the weekend. 

In late afternoon trading, the euro appreciated by +0.20% to $1.1741 against the dollar, contributing to a +0.34% gain for the week—its strongest performance in a month.

Euro strength contributed to a -0.15% decline in the dollar index, which closed at 97.71. Over the week, the index fell -0.48%, marking its poorest weekly performance since July. The dollar also weakened against the Swiss franc, slipping -0.30% to 0.7951 francs and registering a -0.40% weekly decrease, the largest since mid-August. Against the British pound, the dollar declined -0.31% to $1.3478, with sterling achieving a weekly gain of +0.58%—its most significant rise since 11 August.

The US currency extended its decline against major counterparts after data indicated that US services sector activity stagnated in September, reflecting a slowdown in new orders. According to the Institute for Supply Management, the non-manufacturing purchasing managers' index (PMI) dropped to 50, the threshold distinguishing expansion from contraction, down from 52.0 in August. Economists had anticipated a more modest decrease to 51.7.

Conversely, the dollar edged up slightly against the yen, rising +0.03% to ¥147.45, after having fallen as much as 0.40% earlier in the session. The yen rose +1.36% last week, which would be the biggest since mid-May.

BoJ Governor Kazuo Ueda adopted a cautious stance on the global economic outlook, which tempered expectations for an imminent rate hike. Additionally, market participants remained focused on Saturday’s Liberal Democratic Party election, which is expected to have implications for Japan’s fiscal policy and central bank direction.

Fixed Income

US 10-year Treasury +3.5 basis points to 4.121%
German 10-year bund -0.2 basis points to 2.702%
UK 10-year gilt -1.9 basis points to 4.695%

US Treasury yields experienced a modest increase during light trading on Friday, as the market remained directionless due to the postponement of critical labour data resulting from the government shutdown. Yields were largely stable following the release of ISM data, with the exception of a brief dip in two-year yields. 

By the close, the 10-year Treasury yield had risen +3.5 bps to 4.121%, while the two-year yield stood at 3.574%, up +2.9 bps. On the longer end of the curve, the 30-year yield advanced +2.1 bps to 4.711%. Over the week, the two-year yield decreased by -7.3 bps, the 10-year yield declined -5.5 bps to 4.121%, and the 30-year yield retreated by -4.6 bps.

According to CME Group's FedWatch Tool, Fed funds futures traders are pricing in a 95.7% probability of a 25 bps rate cut at October’s FOMC meeting, higher than last week’s 87.7%. Traders are currently anticipating 70.6 bps of cuts by year-end, higher than the 65.6 bps expected last week.

Across the Atlantic, eurozone bond yields remained largely unchanged on Friday. The services sector PMI benefited from steady growth in Germany, Italy, and Spain, while ongoing political uncertainty in France continued to weigh on its service industry.

The yield on Germany’s 10-year government bond decreased by -0.2 bps to 2.702%, marking its second consecutive weekly decline and the first two-week drop since mid-June. Over the past week, the 10-year Bund yield fell by -5.2 bps. The 2-year German Schatz, which closely tracks expectations for ECB’s monetary policy, edged up by +0.8 bps to 2.029% for the day but still retreated by -1.0 bps over the week. At the long end of the maturity spectrum, the 30-year yield decreased by -1.0 bps on Friday, contributing to a weekly drop of -5.6 bps.

The yield spread between US 10-year Treasuries and German Bunds narrowed by 0.3 bps to 141.9 bps, compared to 142.2 bps in the previous session.

Italy, which has garnered investor confidence in recent years due to its commitment to fiscal discipline, is reportedly ahead of schedule in reducing its budget deficit to 3% of GDP, according to Industry Minister Adolfo Urso. 

Italy’s 10-year government bond yield declined by -0.3 bps to 3.518% and posted its largest weekly drop since May, falling -6.9 bps. The spread between 10-year Italian and German government bonds contracted by 1.7 bps, narrowing from the previous week’s 83.3 bps to 81.6 bps.

Note: As of 5 pm EDT 3 October 2025

Global Macro Updates

US services sector stalls in September. Growth in the services sector came to a halt in September, as the key ISM Services Index fell to 50.0, down from 52.0 in August and below the consensus forecast. Hitting its lowest point since May 2025, the index now sits precisely on the line that separates economic growth from decline.

A closer look at the components reveals a mixed but weakening picture. While the New Orders Index remained positive at 50.4, it showed a sharp slowdown from the previous month. The Employment Index ticked up to 47.2 but continued its four-month streak of contraction. Meanwhile, price pressures intensified, with the Prices Index rising to 69.4. Reflecting growing caution, the Inventories Index reversed its recent trend, falling back into contraction at 47.8. Tariffs were a recurring theme of concern, blamed for increasing costs in everything from food imports to real estate and casting a shadow of uncertainty over the economy.

A separate report, the S&P PMI Services Index, offered a somewhat brighter view, coming in at 54.2. Although it also showed a slight softening in business activity, it pointed to a marginal increase in employment and the weakest rise in selling prices in five months. However, it shared the ISM's observation that overall costs, pushed higher by tariffs, continued to rise at an accelerated pace.

Sanae Takaichi wins Japan LDP leadership race. Sanae Takaichi is set to become Japan's first female prime minister after securing the presidency of the ruling Liberal Democratic Party (LDP) on Saturday in an upset victory over front-runner Shinjiro Koizumi. Takaichi defeated Koizumi in a final runoff by 185 votes to 156, a win credited to a surge of support from the party's rank-and-file members and the backing of the powerful Aso faction.

In her first address, Takaichi outlined a platform focused on immediate cost-of-living relief and a foreign policy centred on strengthening Japan's global position within a ‘free and open Indo-Pacific.’ She also signaled an intent to expand the ruling coalition, though it remains unclear how her conservative administration will negotiate with more moderate opposition parties.

On monetary policy, Takaichi maintained a traditional stance, asserting that while the government is ultimately responsible for the economy, she will respect the independence of the BoJ and entrust it with specific policy decisions. Her formal appointment as prime minister is expected when the Diet reconvenes around mid-October.

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