Daily Market Outlook - Thursday, Oct. 16

By Patrick Munnelly of Tickmill

Thursday, October 16, 2025 6:15 AM EDT

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Asian markets advanced as investors shifted their focus towards technology stocks, following a week dominated by concerns over a potential US-China trade war. The MSCI index of regional shares climbed over 1%, with key indices in South Korea, Japan, and mainland China posting impressive gains. This rally was partly driven by renewed interest in tech companies, spurred by Wednesday's positive news from Dutch chip-making giant ASML. The company's performance reignited optimism that the AI boom could continue to bolster corporate earnings. Japan's Nikkei surged, driven by gains in chip and artificial intelligence-related stocks that lifted the index. The momentum picked up following record-breaking earnings reported by Taiwanese semiconductor giant TSMC. Additionally, political developments provided a boost, as fiscal dove Sanae Takaichi's campaign to become Japan's next prime minister regained traction. Takaichi called on opposition party leaders from Osaka to back her in an upcoming parliamentary vote that will determine the country's next prime minister.

Meanwhile, gold prices soared to $4,242 per ounce, marking a year-to-date surge of over 60%. The precious metal's appeal was heightened by ongoing trade tensions and expectations of future interest rate cuts by the Federal Reserve. Oil prices also rebounded from a five-month low after U.S. President Donald Trump stated that Indian Prime Minister Modi had agreed to halt purchases of Russian oil, a move that could potentially tighten global supply. The broad rally across Asian markets highlighted investors' sustained confidence in the region, despite escalating trade disputes between the U.S. and China. So far this year, Asian equities have outperformed their U.S. counterparts, with the MSCI regional index up an impressive 23%. China’s September CPI fell -0.5% y/y, slightly below expectations (-0.2%), though deflationary pressures have eased recently. Core CPI rose to +1.0% y/y, a 21-month high, driven by gradual increases in services and non-food prices. The headline decline stems from falling food prices (notably pork and eggs), partly due to base effects, but this may reverse by year-end. Producer prices remain weak, impacted by domestic overcapacity despite firming commodity prices. While the “anti-involution” campaign and higher commodity prices could support PPI, excess manufacturing capacity and falling home prices weigh on confidence. Without stronger domestic demand, price dynamics may remain subdued.

The UK economy grew 0.1% m/m in August, aligning with expectations. However, July’s GDP was revised down to -0.1% m/m, leaving the overall level slightly weaker than forecasted. The BoE now faces downside risks, as Q3 growth needs a 0.5% m/m rise in September to meet the 0.4% q/q target. While smoothed growth appears better at 0.3% 3m/3m, momentum in the services sector has stalled after a strong June, with healthcare driving growth and consumer-facing sectors declining by -0.6% 3m/3m. This reliance on non-market sectors highlights vulnerabilities, and subdued consumer activity could weigh on broader economic strength. Though not enough to prompt a November rate cut, it supports expectations for further cuts in the coming months, aligning with Bailey’s recent comments on the UK operating below potential.

The rapid rise of stablecoins could lead global policymakers to reconsider bank capital standards for crypto assets, according to Erik Thedéen, chair of the Basel Committee on Banking Supervision. "Stablecoins are the talk of the town," said Thedéen, who also serves as the governor of Sweden's Riksbank, during a Wednesday conference in Washington.