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- Gold reaches new record highs while stocks fall on credit risk and economic uncertainty.
- China continues to face deflation, with PPI remaining negative for three years due to falling exports and weak demand
- Australia and UK show weak data, leading to more policy divergence.
- India pledged to stop buying Russian oil following US pressure.
- IMF upgrades global growth with warnings of new trade risks.
As the week wraps up, major economies continue to grapple with domestic and global challenges, from renewed trade tensions to persistent deflation, weak labor markets, and sluggish growth.
Gold Reaches New Record High While Stocks Plunge on Credit Risk
Gold reached a new record high of $3,479 per ounce on Friday and is on track to its strongest weekly gain for nine weeks, as markets shifted to safe-haven assets amid growing economic uncertainty.
US stocks closed lower on Thursday, with the S&P 500 closing 0.63% lower and the Nasdaq 100 declining 1.3%, with financial stocks leading the declines following disclosures of troubled loans among regional banks, fueling credit risks. ⁽¹⁾
Wall Street has experienced sharp swings this week after last Friday’s selloff triggered by President Donald Trump’s renewed tariff threats on China, with the S&P 500 up as much as 2.6% due to dovish remarks from Fed Chair Jerome Powell before surrendering more than half those gains.
China’s Deflation Continues with Trade Challenges
China’s CPI fell more than expected in September, coming in at 0.3% YoY, though it improved from August’s 0.4% decline. Core CPI, however, rose to 1%, the highest level since February 2024. ⁽²⁾
Producer prices continue to contract, declining 2.3% YoY, in line with forecasts but rising from 2.9% in August and 3.6% in July. Deflation has been hurting producer prices for three consecutive years, pressuring Chinese manufacturers as it is largely driven by US tariffs and weak consumer confidence. ⁽³⁾
Weak consumer demand has added pressure to China’s economy, which continues to struggle with a prolonged housing downturn, while exports to the US have fallen by double digits since Liberation Day. If US President Donald Trump proceeds with his plan for an additional 100% tariff, total duties on Chinese exports to the United States would rise to about 155%. ⁽⁴⁾
Australia’s Labor Market Weakens
Australia’s labor market showed signs of weakness, with the unemployment rate rising to 4.5%, above expectations of 4.3% and reaching the highest level in four years. Unemployment has been steadily climbing from its record lows over the past two years, but the pace of deterioration now appears to be accelerating. Employment only grew by 14.9k, falling short of the forecast of 20.5k. ⁽⁵⁾
While softer labor data could strengthen expectations for a rate cut, the Reserve Bank of Australia may hold off on easing at its next meeting in early November. The latest minutes indicated that household spending and economic growth have been stronger than anticipated, suggesting less urgency for cuts, with policymakers still characterizing the labor market as resilient.
The RBA is expected to wait for the upcoming CPI report on October 29 before making any decision on monetary policy.
UK Economy Slows, Raising chances of a Rate Cut
The UK economy only grew 0.1% in August, aligning with forecasts, while July’s data was revised to a contraction of 0.1% from a flat reading. This comes after 0.4% growth in June. Second-quarter GDP expanded by 0.3%, down from 0.7% in the first quarter, boosted by pre-tariff activity. ⁽⁶⁾
The Bank of England is caught between persistent inflation and weakening economic and labor market conditions. Inflation remains well above the BOE’s 2% target at 3.8%, with the unemployment rate has risen to 4.8%. Private sector wage growth slowed to 4.4% annually, from 6%, with the three-month rate at 2.4%, and could even drop below 4% by November. ⁽⁷⁾
The Autumn Budget will be released on November 26 and might include tax hikes and spending cuts, weighing more on growth. If inflation and wage pressures continue to ease, the Bank of England may consider cutting rates in December following the budget release. For now, the BOE is expected to keep rates unchanged in November.
Geopolitics: India will Stop Buying Russian Oil, IMF Upgrades Growth Forecasts
India’s Prime Minister Modi has pledged to stop buying oil from Russia following a requested from President Trump. The decision is expected to take time to implement but aims to increase pressure on Moscow to move towards peace in its war against Ukraine. Currently, India imports 1.7 million barrels of oil per day from Russia. ⁽⁸⁾
India’s purchase of Russian oil have become a weak point in the relationship between Washington and New Delhi. Trump imposed additional tariffs of 25% on India back in August, raising the total levy to 50%, while India criticized the US for continuing its own trade with Russia.
The International Monetary Fund (IMF) raised its global growth forecast to 3.2% for 2025, up from July’s 3%. The improvement reflects lower tariffs, supply chain adjustments, stronger policy support in Europe and China, and the boost from artificial intelligence. Growth for 2026 is projected at 3.1%. ⁽⁹⁾
However, Trump’s latest threat of imposing a tariff rate of 100% on China over rare earth elements exports could lead to a new trade war. A renewed escalation in tariffs between the US and China could prompt the IMF to revise its 2026 growth outlook lower.
