Market Updates

Recent events in Greenland show how unpredictable geopolitics can be. Hours after ruling out a military option in Davos, President Trump announced a “framework for a future deal” after talks with NATO Secretary General Mark Rutte.

The year has only just begun, yet 2026 is already setting an unusual tone with markets feeling slightly out of sync. Emerging markets are pushing to new highs, gold is drifting upwards again and political noise from Washington is never far from the surface, causing wide swings in commodities.

Last week’s key macro data reinforced expectations that the Federal Reserve (Fed) will continue cutting rates in 2026. Inflation eased more than anticipated to 2.7% year-on-year, while unemployment rose to 4.6%, confirming a softer labour market. So far, markets have welcomed this slowdown as it gives the Fed room to ease further. As long as unemployment does not rise sharply, we remain confident that markets can absorb a gradual softening in labour market conditions. 

As expected, the US Federal Reserve (Fed) cut interest rates for the third time this year, lowering its target range by 25 basis points to 3.50-3.75%. Chair Jerome Powell cited a softening labour market, noting that payroll growth may be overstated. Inflation pressures also appear slightly weaker than anticipated.

After a volatile start of November, equity markets resumed their uptrend last week with the S&P 500 index now almost back at its all-time high. Earlier weakness reflected concerns over tech valuations and uncertainty around a December rate cut by the Federal Reserve (Fed).

It wasn’t just the first snowflakes that fell in parts of Europe last week; markets too. The posterchild of the AI rally, Nvidia, posted strong earnings, with revenue guidance exceeding expectations. But investors are questioning whether the AI trade has run too far, too fast.

The US government shutdown has finally ended after a record 43 days. Markets initially reacted positively to the news, with Treasury yields declining, equities recovering and the dollar stabilising. However, the positive mood didn’t last, especially in the US where equities finished the week lower, while bond yields and the dollar also weakened.

Trump turned his Asia tour into a series of trade deals. Four ASEAN countries (Malaysia, Cambodia, Thailand, and Vietnam) will see lower tariffs, mostly in exchange for better access to critical minerals. South Korea pledged USD 350 billion in US investments for lower tariffs too. And with China, Trump struck a framework deal. He traded tariff cuts for two key concessions: a one-year postponement of China’s rare-earth export restrictions and commitments to purchase US agricultural products.

Gold took a breather last week after nine straight weeks of gains. Prices slipped 2.8%, but that comes after a 35% surge since June. There wasn’t a clear trigger behind the move, which tells us that the fundamental outlook hasn’t changed. It’s most likely that investors are locked in profits. Valuations are high, so short-term caution makes sense. But the long-term case for gold hasn’t changed.

With the US government still shut down, official data is on hold. That puts third-quarter earnings front and centre as investors look for clues on the health of the US economy. The Q3 earnings season kicked off last week, with the largest US banks delivering strong results. A few regional banks flagged credit quality issues, but those seem isolated. With interest rates likely heading lower and economic growth holding up, we see little reason for broad credit stress ahead.

US President Trump has threatened a 100% tariff on all Chinese imports by 1 November in response to China’s trade restrictions on rare earths, which are critical for production in technology across industries.

The odds of a US government shutdown appear to be rising. Bookmakers see a three-in-four chance. Congress hasn’t passed any of the 12 funding bills it needs to approve before 1 October, the start of the US fiscal year. If legislators don’t act, non-essential government functions will go offline.