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The US stocks closed higher on Friday as investors reacted positively to a PCE inflation report that met expectations, yet factored in President Trump’s new wave of tariffs and softening consumer sentiment. The Dow Jones (US30) rose by 0.65% (+0.09% for the week), the S&P 500 (US500) gained 0.59% (-0.16% for the week), and the tech-heavy Nasdaq (US100) closed 0.44% higher (-0.34% for the week). The August PCE Index, the Fed’s preferred inflation gauge, showed core inflation at 2.9% year-over-year, supporting expectations for a quarter-point rate cut at upcoming meetings. However, new tariffs on pharmaceuticals, heavy trucks, and furniture announced by President Trump added uncertainty, alongside fears of a potential government shutdown.

Last week, the Bank of Canada cut its key interest rate by 25 basis points to 2.5% for the first time since March, citing a weak labor market. The Central Bank stated it would be prepared for another cut if the economy continues to face risks in the coming months. However, economists believe this month’s rate cut is not enough to eliminate the “slack” in Canada’s labor market. Many are confident the next cut should occur in October and should bring the rate to the lower end of the two percent target range to address Canada’s persistent economic weakness and low business investment, which have been exacerbated by the trade conflict.

European stock markets were mostly higher on Friday. Germany’s DAX (DE40) rose by 0.87% (+0.73% for the week), France’s CAC 40 (FR40) gained 0.97% (+0.29% for the week), Spain’s IBEX35 (ES35) advanced 1.30% (+0.82% for the week), and the UK’s FTSE 100 (UK100) closed 0.77% higher (+0.74% for the week).

The UK faces 100% tariffs on pharmaceutical products imported into the US. Late last week, Trump announced the 100% tariffs on pharmaceutical imports, which will apply to companies unless they establish a manufacturing presence in the US. The EU and Japan are exempt from this new tariff threat as both countries have secured trade deals capping pharmaceutical duties at 15%. According to US trade data, pharmaceutical imports from the UK represented about 3.3% of total US drug imports in 2024.

WTI crude oil gained 1.1% on Friday to settle at $65.70 a barrel, marking its largest weekly gain in three months, up over 4%. The rally was fueled by escalating geopolitical tensions, as Ukrainian drone strikes on Russian energy infrastructure prompted Moscow to restrict diesel and gasoline exports, leading to supply deficits in several regions. Further support came from increasing pressure from the US and NATO, including threats of sanctions and calls for allies to cut Russian oil purchases.

Silver climbed over 1% on Monday to top $46.5 per ounce, hitting a new 14-year high amid a weakening dollar due to mounting risks of a US government shutdown. Friday’s PCE report showed stable inflationary pressures, strengthening expectations that the Fed has room for further rate cuts this year. Markets are now pricing in about a 90% chance of a rate cut next month and about 65% in December. Supply-demand imbalances added support, with the Silver Institute expecting a fifth consecutive annual deficit in 2025 as demand outpaces supply by over 100 million ounces, leading to further stock depletion.

Asian markets traded mixed last week. Japan’s Nikkei 225 (JP225) fell by 0.61%, China’s FTSE China A50 (CHA50) gained 0.06%, Hong Kong’s Hang Seng (HK50) dropped 1.25%, and Australia’s ASX 200 (AU200) ended the week down 0.13%.

The Reserve Bank of Australia (RBA) will hold its meeting tomorrow. Investors largely expect the RBA to keep the official cash rate (OCR) at 3.60%, while a 25 basis point cut is widely anticipated at the November meeting. The RBA has already cut the rate three times in 2025. Despite the easing, Governor Michele Bullock continues to emphasize a cautious, data-dependent approach, reaffirming the bank’s commitment to the 2-3% inflation target. Second-quarter CPI data confirmed that inflation continues to ease, with headline inflation slowing from 2.4% to 2.1% and trimmed mean CPI falling from 2.9% to 2.7%. However, the August monthly CPI surprised some by rising slightly from 2.8% to 3.0%.

The New Zealand dollar remains pressured by expectations of further monetary easing from the Reserve Bank of New Zealand (RBNZ). Markets are mostly pricing in a quarter-point rate cut to 2.75% next week, with some even suggesting a slight possibility of a larger half-percent reduction. These expectations have been reinforced by a series of weak economic data, including a Q2 GDP contraction, though comments from new RBNZ Governor Adrian Orr, who stressed a commitment to low and stable inflation, have added uncertainty to the policy outlook.

• S&P 500 (US500) 6,643.70 +38.98 (+0.59%)
• Dow Jones (US30) 46,247.29 +299.97 (+0.65%)
• DAX (DE40) 23,739.47 +204.64 (+0.87%)
• FTSE 100 (UK100) 9,284.83 +70.85 (+0.77%)
• USD Index 98.18 -0.37 (-0.38%)
   

News feed for: 2025.09.29

• US Pending Home Sales (m/m) at 17:00 (GMT+3).

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