Market navigator: week of 8 September 2025
Global bond markets sold off sharply while precious metals rallied on Fed rate cut expectations. Key inflation data from China and the US will shape monetary policy this week.
Summary
- What happened last week: Bond yields surged globally amid fiscal concerns while weak US jobs data boosted Fed rate cut expectations.
- Markets in focus: US equities tested support levels, Hong Kong stocks gained on Fed cut optimism, yen weakened significantly.
- The week ahead: Critical inflation data from China, Europe, and the US will influence monetary policy direction.
What happened last week
- Long-term bonds sell off: Government bond yields surged dramatically across developed markets, reflecting investor concerns over mounting fiscal deficits and persistent inflation. The UK's 30-year yield briefly hit 5.72%, its highest since 1998, while French yields climbed to 4.52%. US markets approached 5%, with the situation exacerbated by substantial corporate bond issuance. Contagion effects subsequently impacted Japanese and Australian bond markets.
- Sharp deterioration in US labour conditions: Employment indicators delivered disappointing results, with job openings declining to 7.18 million, the lowest in 12 months. Non-farm payrolls expanded by just 22,000, well below the 75,000 consensus, while unemployment rose to 4.3%, the highest since October 2021. Bond futures now fully price in a 25 basis point Federal Reserve (Fed) rate cut at its meeting next week.
- Chinese business activity indicators: Both official and RatingDog purchasing managers' index (PMI) surveys showed improving business conditions following the tariff truce extension until November, though expansion rates remain below historical averages. The National Bureau of Statistics Composite PMI recovered from 50.2 to 50.5 in August. Continued declines in selling prices reflect ongoing challenges from intensive price competition.
- Precious metals rally: Supported by Fed rate cut expectations, gold surpassed its historic April record, closing at $3,586 per ounce. Silver held firm above $40 per ounce, reaching its highest level in 14 years, while platinum advanced 1%.
Markets in focus
US equities confront historically challenging September environment
September has historically represented the most challenging month for US equity performance, with the S&P 500 generating an average return of -0.7% since 1950. The opening week of September 2025 has aligned with historical patterns, demonstrating heightened volatility compared to the preceding period. While the S&P 500 concluded the week with a modest 0.3% gain, intraweek trading ranges more than doubled from the previous week.
Market participants have recently responded favourably to economic weakness under the 'bad news is good news' paradigm, as indicators of economic deceleration could prompt accelerated Fed rate cuts. However, following last week's employment data release, investors are increasingly concerned that monetary policy easing may prove insufficient to address labour market deterioration.
The earnings season has come to an end. Among technology stocks, Salesforce declined more than 5% despite exceeding earnings expectations, as its Agentforce platform has yet to establish the company's competitiveness in the artificial intelligence sector. Conversely, Broadcom's share price surged 9%, bucking the trend where most chip companies declined following their earnings this quarter, as the company announced a $10 billion AI accelerator order that will substantially enhance its growth trajectory.
Within the consumer sector, American Eagle jumped 38% after delivering better-than-expected earnings, benefiting from a high-profile marketing campaign featuring Sydney Sweeney. In contrast, Lululemon shares plummeted 19% as management highlighted risks associated with stringent trade policies.
The US Tech 100 index has reached a technically significant juncture, currently testing support at its 20-day moving average and positioned just below the lower boundary of the ascending channel established from mid-May levels. Failure to maintain current support levels may signal the corrective Wave 4 under Elliott Wave is underway. A 23.6% Fibonacci retracement could direct the index towards 22,400, approximating February's peak resistance level. Positive market developments may propel the index towards the upper channel boundary at 24,700.
Figure 1: US Tech 100 index (daily) price chart
Hang Seng Index takes a breather as onshore markets cool down
The Hang Seng Index advanced 1.4% during the week, capitalising on optimistic sentiment surrounding potential Fed rate cuts in September. Alibaba emerged as the largest index contributor with a stellar 14% weekly return following analyst target price revisions, driven by improved prospects for the company's AI platform capabilities. Zijin Mining rallied 10%, supported by record-breaking gold prices. BYD underperformed with an 8% decline, reflecting growth concerns highlighted in its latest earnings report.
From a technical analysis perspective, the Hang Seng Index demonstrated resilience by swiftly recovering after briefly breaching the lower boundary of the ascending channel established since mid-April, confirming the uptrend's integrity. A decisive breakthrough above the persistent resistance around 25,740 would unlock further upside potential towards 26,300, representing a significant resistance level from October 2021. Any retracement would likely find support at the 100-day moving average at 24,040.
Figure 2: Hang Seng Index (daily) price chart
Japanese Yen approaches potential trend reversal
The yen has emerged as the weakest performer among G7 currencies against the USD/JPY over the past three months, declining 3.2%. Political leadership instability represents a key contributing factor. Following the ruling party's defeat in the Upper House election, Prime Minister Shigeru Ishiba announced his decision to step down on Sunday. Additionally, the persistent rise in long-term bond yields, as the Bank of Japan (BOJ) scales back bond purchasing, has pressured the currency. Although Friday's robust 30-year Japanese government bond auction provided temporary relief, with 10-year yields declining to 1.57% and 30-year yields falling to 3.24%.
BOJ Deputy Governor Himino declined to provide specific guidance on rate hike timing, indicating that the central bank requires additional data to assess the impact of US tariffs on Japan's apparently robust economy, as evidenced by recent GDP and inflation data. His neutral messaging further weighed on the yen, as market participants had anticipated a more hawkish stance. Interest rates swap markets had priced in a 70% probability of a rate increase by year-end before his Tuesday speech, which has since declined to 42%.
The technical outlook presents challenges for yen strength. The USD/JPY chart displays a clear ascending triangle pattern formed since April, characterised by horizontal resistance at 148.6 and an ascending support trendline originating from the April low around 139.9. The currency pair is attempting to break above this formation, which would confirm a reversal of the dollar's bear trend since January. The emergence of a golden cross pattern last week and USD/JPY's movement above the 200-day moving average provide additional technical support. Key monitoring levels include resistance at the recent peak of 150.9 and support in the 146-147 area, with a break below this zone invalidating the bullish breakout scenario.
Figure 3: USD/JPY (daily) price chart
The week ahead
The forthcoming week presents critical economic data releases from China, Europe, and the US that will significantly influence global market directions as we approach the final quarter of 2025.
China's economic trajectory faces intense scrutiny with Wednesday's inflation data release. Consumer prices remained flat in July while producer prices extended their deflationary streak to 34 consecutive months, reflecting intense competitive pressures and pricing challenges. Markets anticipate prices to continue to decline, though any unexpected uptick towards positive territory could signal recovery from the prolonged deflationary environment affecting the world's second-largest economy.
The August new yuan loan figures, scheduled for Friday, carry exceptional significance following July's surprising RMB 50 billion contraction—the first negative reading in two decades. Should loan growth remain negative for a second consecutive month, it would indicate deepening structural challenges within the financial system, potentially triggering more aggressive stimulus measures from Beijing.
The European Central Bank (ECB) convenes Thursday to determine interest rate policy. Recent eurozone inflation rising to 2.1% supports market expectations for unchanged rates as policymakers assess the cumulative impact of eight rate cuts implemented since June 2024. President Lagarde's press conference guidance could significantly impact euro strength and European asset, particularly if policymakers signal concerns regarding growth momentum sustainability.
US inflation data assumes critical importance ahead of the Federal Open Market Committee (FOMC) meeting on 16-17 September. Core consumer price inflation accelerated to 3.1% year-on-year in July. Markets will scrutinise the data for evidence of tariff impact on American consumers. Any significant upside deviation could complicate the central bank's anticipated dovish pivot and potentially undermine risk asset performance as stagflation risks emerge.
Figure 4: China's inflation trend
Key macro events this week
Monday 8 September 2025
- 11.00am (HK time) — China Balance of Trade (August): previous $98.24B, consensus $99.2B
- 11.00am (HK time) — China Exports YoY (August): previous 7.2%, consensus 5%
- 11.00am (HK time) — China Imports YoY (August): previous 4.1%, consensus 3%
Tuesday 9 September 2025
- 8.30am (HK time) — Australia Westpac Consumer Confidence Change (September): previous 5.7%
- 9.30am (HK time) — Australia NAB Business Confidence (August): previous 7
Wednesday 10 September 2025
- 9.30am (HK time) — China Inflation Rate YoY (August): previous 0.0%, consensus -0.2%
- 9.30am (HK time) — China PPI YoY (August): previous -3.6%, consensus -2.9%
- 8.30pm (HK time) — US PPI MoM (August): previous 0.9%, consensus 0.3%
Thursday 11 September 2025
- 8.15pm (HK time) — Euro Area ECB Interest Rate Decision (September): previous deposit facility rate 2.0%, consensus 2.0%
- 8.30pm (HK time) — US Core Inflation Rate MoM (August): previous 0.3%, consensus 0.3%
- 8.30pm (HK time) — US Core Inflation Rate YoY (August): previous 3.1%
- 8.30pm (HK time) — US Inflation Rate MoM (August): previous 0.2%, consensus 0.3%
- 8.30pm (HK time) — US Inflation Rate YoY (August): previous 2.7%, consensus 2.9%
Friday 12 September 2025
- 2.00pm (HK time) — UK GDP MoM (July): previous 0.4%, consensus 0%
- 10.00pm (HK time) — US Michigan Consumer Sentiment Preliminary (September): previous 58.2, consensus 59.2
- China New Yuan Loans (August): previous RMB -50B, RMB 750B
Source: Trading Economics, LSEG (as of 6 September 2025)
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