Market navigator: week of 3 November 2025
US-China reach one-year trade truce as central banks diverge on policy. Markets await critical RBA and BoE rate decisions, with US employment data potentially delayed by government shutdown.
Summary
- What happened last week: US-China one-year truce reduced tariffs to 47%. Fed cut rates but signalled December uncertainty; BoJ and ECB held steady.
- Markets in focus: S&P 500 rose 2.3% despite narrowing breadth. Hang Seng Index declined 3.5% on profit-taking. Nikkei 225 surged 16.6%, its strongest monthly gain since 1990.
- The week ahead: Australia and UK rate decisions dominate. US employment data faces potential shutdown delays.
What happened last week
- US-China diplomatic breakthrough yields temporary reprieve: Trump and Xi reached an accord in Busan, halving fentanyl-related tariffs to bring effective rates on Chinese imports to 47%. China committed to postponing rare earth mineral export restrictions for one year while pledging to procure US agricultural products. Equity markets remained muted given the arrangement's temporary nature.
- Strategic APAC partnerships: President Trump conducted bilateral meetings with Japanese Prime Minister Takaichi and South Korean President Lee, consolidating trade frameworks. The US formalised a rare earth supply agreement with Japan and finalised South Korea's $350 billion US investment plan.
- Central bank policy trajectories diverge: The Federal Reserve (Fed) cut rates by 25 basis points but signalled December uncertainty, with market expectations for further easing declining from 90% to 70%. The Bank of Japan (BoJ) held rates steady, requiring additional time to assess the 15% US tariff impact and preliminary momentum from forthcoming wage negotiations. The European Central Bank (ECB) similarly held unchanged, noting diminished downside risks in the economy.
- Chinese manufacturing activity contracts further: The official manufacturing purchasing managers' index (PMI) registered 49.0, marking six consecutive contractionary months. The National Bureau of Statistics attributed this decline to Golden Week holiday disruptions and elevated global economic uncertainty. The non-manufacturing PMI improved marginally to 50.1, barely entering expansionary territory.
Markets in focus
US equities continue the winning streak
The S&P 500 index concluded October with gains of 2.3%, marking the sixth consecutive month of positive returns. The technology-concentrated Nasdaq 100 advanced 4.8%, while the Dow Jones Industrial Average appreciated 2.5%. Despite this broad-based positive performance, concerning indicators of diminishing market breadth have emerged. The proportion of S&P 500 constituents trading above their 20-day moving average (MA) contracted from 62% at the previous Monday's close to merely 39%. A similar decline occurred at the 200-day MA level, suggesting that recent gains have been increasingly concentrated amongst a narrow cohort of market leaders.
Earnings season has progressed substantially, with 63% of S&P 500 constituents having reported. The blended earnings growth rate stands at 13.8% so far, surpassing the second quarter's 12% growth trajectory. Five members of the Magnificent Seven cohort released results during the week. Alphabet shares appreciated 2% following revenue of $102 billion that exceeded analyst estimates, propelled by robust cloud infrastructure growth of 34%. Microsoft similarly beat both earnings and revenue projections with Azure expanding 40%, though shares declined 4% as investors focused on accelerating capital expenditure growth. Meta plunged 14% despite surpassing revenue forecasts, after disclosing a $15.9 billion one-time tax charge that resulted in an earnings per share miss alongside upward revisions to capital expenditure guidance. Apple and Amazon both exceeded expectations in Thursday trading, with Apple shares unchanged as strong iPhone 17 demand offset revenue contraction in China, while Amazon surged 10% as AWS cloud business accelerated to 20% growth – the fastest pace since 2022.
From a technical analytical perspective, beyond the deterioration in market breadth, the Relative Strength Index (RSI) of the US Tech 100 exhibits bearish divergence characteristics, with lower peaks forming while prices continue establishing record highs. Both indicators suggest weakening bullish momentum. Nevertheless, the index retains potential to reach 26,830, representing a 50% extension of Wave 1 to 3 within the Elliott Wave framework. The 20-day MA near 25,200 should provide downside support.
Figure 1: US Tech 100 index (daily) price chart
Hang Seng Index consolidates on profit-taking
Following an approximate 40% appreciation since start of the year, the Hang Seng Index (HSI) terminated its five-month winning sequence, retreating 3.5% in October to close marginally below 26,000.
The highly anticipated Trump-Xi summit in Busan failed to catalyse sustained market enthusiasm, as the agreement's substance had been largely priced into valuations. In fact, 'sell the news' dynamics emerged as investors sought to crystallise substantial year-to-date gains ahead of year-end settlement. We view the deal as constructive, noting the one-year truce duration substantially exceeds the three-month extensions of previous negotiations. Furthermore, the expeditious de-escalation observed in recent discussions reflects Beijing's proactive approach to resolving external challenges as China continues to grapple with persistent structural headwinds within its domestic economy.
Sector rotation dynamics intensified as market participants secured profits from growth-oriented equities, particularly within biotechnology and artificial intelligence (AI) sectors, while reallocating capital towards equities aligned with the 'valuation system with China characteristics' framework – typically denoting undervalued state-owned enterprises offering attractive dividend yields. Energy and Financials sectors led HSI gains during October, while Information Technology, Consumer Discretionary and Communication Services sectors underperformed.
The HSI's inability to maintain positions above its 20-day MA demonstrates insufficient upward momentum. Should the index decline further, triggering a death cross formation between the 20-day and 50-day MA, near-term directional characteristics would likely mirror corrective Wave C within Elliott Wave theory. This downward leg's magnitude would minimally equal corrective Wave A, targeting approximately 24,316. Conversely, swift recovery above the 50-day MA may re-establish the ascending channel pattern established since mid-April, with the recent peak of 27,382 representing key resistance.
Figure 2: Hang Seng Index (daily) price chart
Nikkei 225 posts best monthly performance since 1990
The Nikkei 225 index surged above 50,000 and delivered exceptional returns of 16.6% throughout October, its strongest monthly performance since October 1990. Multiple catalysts underpinned this rally: confirmation of Prime Minister Sanae Takaichi, perceived as supportive of fiscal expansion and accommodative monetary policy; renewed US-Japan strategic partnership; robust corporate earnings; and yen weakness benefiting exporters.
Information Technology emerged as October's best-performing sector, while Financials and Real Estate detracted. Japanese corporations capitalised on AI infrastructure demand, with Hitachi reporting 56% net income growth driven by power grid infrastructure and digital transformation demand. Tokyo Electron raised full-year guidance, benefiting from semiconductor equipment market recovery. The forthcoming week proves critical as automotive exporters Toyota and Honda release earnings alongside technology investor SoftBank.
On balance, markets may insufficiently account for political risks, as PM Takaichi's policy effectiveness could be constrained by the Liberal Democratic Party's declining public support, while domestic consumption remains weak amid negative real wage growth.
Exuberant market sentiment propelled the Japan 225 index beyond its ascending channel established since April, leaving no clearly defined technical resistance. However, the RSI reading of 76 indicates overbought conditions. All seven previous instances when the RSI exceeded 70 preceded pullbacks, though correction magnitudes varied between 2% and 8%. Given the rally's steep trajectory, a technical correction towards the 20-day MA near 49,000 appears probable before the advance resumes.
Figure 3: Japan 225 index (daily) price chart
The week ahead
The forthcoming week centres on critical central bank policy decisions and labour market assessments. The Reserve Bank of Australia (RBA) confronts a complex policy decision on Tuesday. Australia's third quarter trimmed mean inflation accelerated to 3.0% year-on-year (YoY) from 2.7% in the second quarter. Education and housing costs represented primary inflation drivers. Concurrently, the unemployment rate elevated to 4.5% in September, the highest reading since November 2021, complicating the central bank's assessment. Governor Bullock's recent commentary emphasised the institution's reluctance to rely upon isolated data spikes when calibrating policy. Markets anticipate rates holding at 3.6%, with attention concentrated on guidance regarding potential easing timing.
Thursday's Bank of England (BoE) decision carries equivalent significance as policymakers evaluate whether inflation remains sufficiently controlled to justify additional rate reductions from the current 4% level maintained since August. Bond futures markets price a 70% probability of unchanged rates.
Official US employment data release remains uncertain owing to the government shutdown potentially delaying Friday's non-farm payrolls report. However, Wednesday's ADP employment change should provide valuable insights into labour market conditions. Latest weekly data reveals improvement following September's concerning negative 32,000 reading.
China's inflation statistics on Sunday will prove particularly significant following the recent Fourth Plenum's identification of 'involution' – excessive competition driving deflationary pressures – as a priority concern. We anticipate consumer prices may have improved from September's negative 0.3% YoY contraction, though persistent producer price deflation suggests structural challenges persist. Sustained improvement would bolster risk appetite in Chinese and Hong Kong markets.
On the corporate front, technology earnings dominate, with semiconductor leaders Advanced Micro Devices and Qualcomm alongside software providers Palantir and AppLovin reporting results. Their commentary regarding artificial intelligence infrastructure demand, enterprise and government spending will prove critical for technology sector sentiment. Japanese automotive manufacturers Toyota Motor and Honda Motor will provide perspectives on global export conditions.
Figure 4: Australia's latest unemployment and inflation data complicate RBA's decision
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
- US Producer Price Index (PPI) MoM (September): previous -0.1%, consensus 0.3%
- US Retail Sales MoM (September): previous 0.6%, consensus 0.4%
Monday 3 November 2025
- 9.45am (HK time) – China RatingDog Manufacturing PMI (October): previous 51.2, consensus 50.9
- 11.00pm (HK time) – US ISM Manufacturing PMI (October): previous 49.1, consensus 49.2
Tuesday 4 November 2025
- 11.30am (HK time) – Australia RBA Interest Rate Decision: previous 3.6%, consensus 3.6%
- Subject to resolution of shutdown – US JOLTS Job Openings (September): previous 7.227 million
Wednesday 5 November 2025
- 9.45am (HK time) – China RatingDog Services PMI (October): previous 52.9, consensus 52.6
- 9.15pm (HK time) – US ADP Employment Change (October): previous -32K, consensus 25K
- 11.00pm (HK time) – US ISM Services PMI (October): previous 50.0, consensus 51.0
Thursday 6 November 2025
- 8.30am (HK time) – Australia Balance of Trade (September): previous A$1.825 billion, consensus A$3.85 billion
- 8.00pm (HK time) – UK BoE Interest Rate Decision: previous 4%, consensus 4%
Friday 7 November 2025
- 11.00am (HK time) – China Balance of Trade (October): previous $90.45 billion, consensus $100 billion
- 11.00am (HK time) – China Exports YoY (October): previous 8.3%
- 11.00am (HK time) – China Imports YoY (October): previous 7.4%
- 11.00pm (HK time) – US Michigan Consumer Sentiment Preliminary (November): previous 53.6, consensus 54
- Subject to resolution of shutdown – US Non-Farm Payrolls (October)
- Subject to resolution of shutdown – US Unemployment Rate (October)
Sunday 9 November 2025
- 9.30am (HK time) – China Inflation Rate YoY (October): previous -0.3%
- 9.30am (HK time) – China PPI YoY (October): previous -2.3%
Key corporate earnings
(in local exchange time)
Monday 3 November 2025
Tuesday 4 November 2025
Wednesday 5 November 2025
Thursday 6 November 2025
Friday 7 November 2025
Source: Trading Economics, Nasdaq, LSEG (as of 2 November 2025)
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