Market Updates

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.

Last week, the US Federal Reserve (Fed) cut interest rates to the 4.00–4.25% range. It’s the first cut since December 2024. Why now? Even though inflation is above target, the labour market is showing signs of strain and job growth has been revised down.

Global equities continued to climb last week. Tensions in the Middle East and renewed friction between NATO and Russia lifted safe-haven assets like gold. Why are investors buying both growth assets such as equities and defensive assets such as gold?

With market participants returning from the summer break, liquidity is improving and sentiment remains broadly constructive. Equities extended their rally through July and August, despite occasional bouts of volatility and headlines pointing to an uncertain outlook.

The start of last week brought progress on several trade fronts, but also higher volatility towards the end. The US finalised agreements with Japan and the European Union, secured a deal with South Korea and granted Mexico a 90-day extension.

Last week, the US announced new trade deals with the Philippines, Japan, and the EU (following previous deals with the UK, Indonesia and Vietnam, and a framework agreement with China).

Last week, US inflation came in higher than expected, with tariff-related items showing a pick-up in prices. The headline rate rose 0.3% in June compared to May, bringing the annual rate to 2.7% from 2.4%. US Treasury yields rose as the data failed to ease investor concerns that inflation will pick up in the coming few months.

Last week, we hosted a special webcast on geopolitics with Daniele Antonucci, our Chief Investment Officer, and Anna Rosenberg, Head of Geopolitics at the Amundi Investment Institute. During the webcast, we received many questions from the audience, but didn’t have time to address them all. We’ve answered them below.

Signs of a de-escalation in the Middle East helped calm markets last week, with oil prices falling and market sentiment improving, which supported equities, with the S&P 500 reaching a new record. However, US Treasury yields also fell (prices rose), a dynamic usually seen when risk sentiment sours.

The Middle East is still the focus of global markets as the conflict between Israel and Iran continues. The key piece of news is that, over the weekend, the US intervened as well, supporting Israel. Against this volatile geopolitical backdrop, equity markets continued to decline while oil prices rose in anticipation of disruptions in the oil market.