Market navigator: week of 13 October 2025

Summary

• What happened last week: Gaza ceasefire drove oil lower. US-China trade tensions triggered US stocks decline. New Zealand cut rates 50 basis points.
• Markets in focus: Hang Seng Index fell 3% on profit-taking. Political uncertainty drove USD/JPY above 153. Gold breached $4,000 while silver surged to $51.2.
• The week ahead: China releases trade and inflation data. US Q3 earnings season commences with major financials. Inflation data delayed, impacting Fed's October decision.

What happened last week

• Ceasefire in Gaza: Israel and Hamas approved a peace plan proposed by the US and overseen by Turkey, Egypt and Qatar to establish a ceasefire in Gaza. The initial phase encompasses hostage exchange and humanitarian assistance. WTI crude oil plunged over 5% to $58.9.
• Intensifying trade tensions: The US plans to escalate tariffs from 30% to 100% commencing 1 November, responding to China's enhanced rare earth controls and Qualcomm investigation. China imposed reciprocal port fees on US vessels. Uncertainty remains whether Presidents Trump and Xi's potential Asia-Pacific Economic Cooperation meeting could de-escalate tensions. Nasdaq 100 plunged 3.5% on Friday, the largest single-day decline since April.
• Fed faces data uncertainty: September's Federal Open Market Committee (FOMC) minutes revealed majority support for additional rate reductions in 2025, though disagreement exists regarding magnitude. The government shutdown, now in its second week, has prevented release of critical employment and inflation data, potentially complicating the Federal Reserve's (Fed) justification for October rate cuts.
• RBNZ's jumbo cut: The Reserve Bank of New Zealand surprised markets by implementing a substantial 50 basis point reduction. The central bank projects inflation returning to 2% by mid-2026, citing significant spare domestic capacity. The committee signalled openness to further reductions. NZD/USD weakened 1.9%.

Markets in focus

Southbound flow failed to sustain Hang Seng Index momentum

The Hang Seng Index (HSI) declined 3.1% last week, representing its steepest weekly contraction since July. Nearly all gains from the previous week have been eliminated. Profit-taking activity intensified as the prior week's top performers became last week's primary laggards, with SMIC plummeting 15% and Alibaba declining 11%.

Hang Seng Bank emerged as the index's top performer, surging 26% following HSBC's announcement to acquire the company through a privatisation transaction. HSBC is offering HK$155 per share, representing a 30% premium to Hang Seng's closing price on 8 October. The $14 billion transaction will impact HSBC's capital ratio by 125 basis points negatively. HSBC's share price declined 6% last week. The proposal demonstrates HSBC's confidence in Hong Kong's business opportunities. Additionally, the deal is expected to enhance the group's operational efficiency in the territory over the long term.

Hong Kong stocks trading volumes contracted significantly during the National Day Golden Week holiday. Market turnover reached only HK$121.2 billion on 6 October, compared with the daily average turnover of HK$316.5 billion recorded in September. With Southbound flows resuming on 9 October, trading activities are expected to gradually recover.

From a technical perspective, the ascending channel established since mid-April continues to govern HSI's price movement. Following last week's correction, the relative strength index (RSI) has declined below the neutral threshold at 50, suggesting a potential rebound may be imminent. Upside potential extends towards 27,650, represented by the channel's upper boundary. Retracements would likely encounter support at the 50-day moving average near 25,000.

Figure 1: Hang Seng Index (daily) price chart

Political uncertainty drives volatility in Yen

Sanae Takaichi prevailed over prominent contenders Koizumi and Hayashi at the Liberal Democratic Party (LDP) presidential election on 4 October, yet her path to becoming Japan's first female prime minister faces substantial obstacles. The LDP's coalition partner Komeito terminated the 26-year partnership citing failure to strengthen political funding regulations. Takaichi appointed Koichi Hagiuda, who was previously suspended for involvement in a funding scandal, as LDP's acting secretary-general.

With Komeito declining to support Takaichi in the upcoming parliamentary vote, she must secure alliances with alternative parties as the LDP remains 37 seats short of a lower house majority required to assume the prime ministership.

Regarded as a hardline conservative and protégé of former Prime Minister Shinzo Abe, Takaichi is anticipated to support fiscal expansion and accommodative monetary policy. USD/JPY strengthened above 153, reaching the highest level since February, before retracing gains following the coalition's dissolution. 20-year government bond yields surged to 2.75%, the highest level since 1999.

Given the political uncertainties and USD/JPY's decisive breakout above 150, the yen's strengthening trend from earlier this year appears to have reversed, with USD/JPY potentially targeting February's high at 154.8. Technical support is located near the 20-day moving average (MA) at 149.2. Should the yen continue trading within the current range or weaken further, yen carry trades will likely regain popularity. Investors should remain vigilant as an unwinding of carry trades could precipitate extremely volatile conditions in Japanese equity and currency markets, similar to the events of July 2024.

Figure 3: USD/JPY (daily) price chart

Gold and silver achieve historic levels

The gold rally extended to its eighth consecutive week, accumulating an impressive 20% performance during this period. Gold prices established another record high, reaching $4059 per ounce on 8 October.

Concurrently, silver prices surged to $51.20 per ounce, the highest level since the Hunt brothers' squeeze event in 1980. This represents staggering year-to-date gains exceeding 70%, substantially outperforming gold.

Beyond safe-haven demand, diversification from the US dollar and rate cut expectations, silver prices benefit from industrial demand including solar panels and wind turbines. Supply has lagged demand over the past four years and is projected to continue this deficit through 2025.

Technical analysis indicates gold has achieved the target from our previous assessment based on a 100% Fibonacci extension of Elliott Wave 1 from November 2024. The pullback following the $4059 peak reveals profit-taking activity as the RSI reached 88, indicating extreme overbought conditions. The consolidation phase should receive support from the 20-day MA around $3840, with the subsequent rebound possessing potential to challenge resistance at $4200. Should this support level fail to hold, it may signal the commencement of corrective Wave A towards $3700.

Figure 3: Spot gold (daily) price chart

The week ahead

This week presents critical inflection points for global markets, though considerable uncertainty surrounds US data releases following the federal government shutdown that delayed September's employment report and trade figures. Markets anticipate China's trade statistics and the commencement of third-quarter (Q3) earnings season featuring major financial institutions.

China's September trade data assumes heightened importance as investors scrutinise export momentum with the tariff truce with the US scheduled to conclude on 10 November. August demonstrated resilience with exports advancing 4.4% year-on-year (YoY) and the trade surplus reaching $102.33 billion. However, import growth of merely 1.3% YoY signals continued weakness in domestic demand. Wednesday's consumer price index (CPI) data will provide additional insight into domestic economic recovery progress. Deflationary pressure is expected to persist due to intense pricing competition amongst businesses.

The US consumer price index report, originally scheduled for Wednesday, has been postponed to 24 October due to the government shutdown, though will arrive in time for the Fed's assessment before its 28-29 October policy meeting. Thursday's producer price index (PPI) data, forecast to rebound 0.3% month-on-month (MoM) following August's contraction, will also likely face delays until further notice. Should inflation exceed expectations, markets may recalibrate rate cut probabilities for the remainder of 2025. Currently, the market is pricing in a 98% probability of a rate cut in October.

Third-quarter earnings season officially commences with results from major US banking institutions including JPMorgan Chase, Goldman Sachs and Citigroup. Financial sector performance will illuminate the health of consumer lending and investment banking activity. Technology sector attention centres on results from ASML and Taiwan Semiconductor Manufacturing Company (TSMC), whose guidance will prove critical for assessing AI infrastructure demand. Strong earnings accompanied by optimistic forward guidance could catalyse renewed equity market momentum, while disappointments may trigger sector rotation or broader risk aversion.

According to Factset's Earnings Insight report, analysts are estimating an earnings growth rate of 8% for the S&P 500 in Q3 following upward revisions during the period. The number of companies issuing positive earnings guidance (56) substantially exceeds the five-year average (43), driven by optimistic outlooks from technology companies. This forecast presents a stark contrast with sentiment prior to Q2's earnings season, when analysts expected earnings growth below 5%. With substantial optimism priced in and valuations significantly above long-term averages, questions emerge regarding whether elevated expectations for Q3 will face disappointment.

Figure 4: S&P 500 earnings growth expectations by sector (3 October vs. 30 June)

Key macro events this week

Potential data release from delay caused by the US government shutdown

• US Non-Farm Payrolls (September): previous 22K, consensus 50K
• US Unemployment Rate (September): previous 4.3%, consensus 4.3%
• US Trade Balance (August): previous -$78.3B, consensus -$60.4B

Monday 13 October 2025

• 11.00am (HK time) — China Trade Balance (September): previous $102.33B, consensus $98.96B
• 11.00am (HK time) — China Exports year-on-year (YoY) (September): previous 4.4%, consensus 6%
• 11.00am (HK time) — China Imports YoY (September): previous 1.3%, consensus 1.5%

Tuesday 14 October 2025

• 8.30am (HK time) — Australia NAB Business Confidence (September): previous 4
• 8.30am (HK time) — Australia RBA Meeting Minutes
• 2.00pm (HK time) — UK Unemployment Rate (August): previous 4.7%, consensus 4.7%

Wednesday 15 October 2025

• 9.30am (HK time) — China Inflation Rate YoY (September): previous -0.4%, consensus -0.1%

Thursday 16 October 2025

• 8.30am (HK time) — Australia Unemployment Rate: previous 4.2%, consensus 4.3%
• 2.00pm (HK time) — UK GDP MoM (August): previous 0%, consensus 0.2%
• Subject to resolution of shutdown — US PPI MoM (September): previous -0.1%, consensus 0.3%
• Subject to resolution of shutdown — US Retail Sales MoM (September): previous 0.6%, consensus 0.4%

Friday 17 October 2025

• Subject to resolution of shutdown — US Building Permits Preliminary (September): previous 1.33M
• Subject to resolution of shutdown — US Housing Starts (September): previous 1.307M

Key corporate earnings

(in local exchange time)

Tuesday 14 October 2025

• JPMorgan Chase
• Johnson & Johnson
• Wells Fargo
• Goldman Sachs
• BlackRock
• Citigroup

Wednesday 15 October 2025

• ASML
• Bank of America
• Morgan Stanley
• Abbott
• United Airlines

Thursday 16 October 2025

• TSMC

Friday 17 October 2025

• American Express
• Zijin Mining

Source: Trading Economics, Nasdaq, LSEG (as of 11 October 2025)