tl;dr
Global markets rally on trade relief, rate cut optimism, and a gold surge, as Trump's tariff remarks and European banking stock rebounds fuel investor confidence amid shifting economic expectations.
**Global Markets Rally on Trade Relief and Rate Cut Optimism as Gold Surges**
Global markets opened the week on a positive note, with investors optimistic about the second week of third-quarter earnings and signs of easing trade tensions. U.S. futures pointed higher on Sunday night, with the Dow Jones Industrial Average climbing 0.2%, the S&P 500 rising 0.2%, and the Nasdaq 100 gaining 0.3%. Traders remained focused on key inflation data and high-profile earnings reports later in the week, while President Donald Trump’s recent remarks on tariffs provided a boost to investor sentiment.
**Trade Tensions Ease as Trump Eases Tariff Threats**
President Trump’s announcement that he had exempted dozens of products from reciprocal tariffs and was considering removing duties on hundreds more helped calm markets. His statement that a proposed 100% tariff on Chinese goods “would not be sustainable” signaled a shift in tone, offsetting earlier fears of renewed trade conflicts. Analysts noted growing consensus within the administration to reduce import costs for certain non-U.S.-produced items, easing some of the volatility that had unsettled investors the previous week.
**Europe Rebounds as Banking Stocks Lead Recovery**
European markets joined the global rally on Monday, with pan-European indices surging after a turbulent few days dominated by U.S. banking sector concerns. The Stoxx 600 climbed 0.8%, while the FTSE 100, DAX, CAC 40, and FTSE MIB rose 0.5%, 1.1%, 0.7%, and 1.43%, respectively. Banking stocks led the charge, with Banco Sabadell and BPER Banca jumping 4.4% and 4%, respectively. The rebound in Europe helped stabilize global sentiment as investors balanced improving risk appetite against lingering credit concerns tied to Wall Street’s loan portfolios.
**Bonds Rally as Treasury Yields Slide**
U.S. Treasury yields continued their downward trend, with the two-year yield dropping below 3.4%—its lowest level since 2022—and the 10-year yield briefly touching 3.93% before rebounding to 4%. The decline reflected worries over trade uncertainty, weaker jobs data, and high stock valuations, prompting investors to seek safe-haven assets. The Bloomberg Treasury Index has surged 6.6% year-to-date, its best performance since 2020. Morgan Stanley’s Matthew Hornbach predicted that 10-year Treasury yields above 4% could be a thing of the past, citing the potential for a prolonged government shutdown to further fuel the bond rally.
**Gold Surges on Geopolitical Fears and De-Dollarization**
Commodity markets remained active as gold prices climbed 0.3% to $4,259.34 per ounce, driven by central bank purchases, ETF inflows, and geopolitical tensions. Despite a 1.8% drop on Friday following Trump’s tariff comments, gold remains up over 60% year-to-date, hitting an all-time high of $4,378.69 last week. Silver recovered from a 4.4% plunge, rising 0.6% to $52.18 per ounce, while platinum surged 2% and palladium edged lower. A weaker U.S. Dollar Index (DXY) also supported the metals rally, with the dollar trading around 98.40 during Monday’s Asian session.
**Fed Rate Cuts Remain in Focus**
Market expectations for a Federal Reserve rate cut intensified, with CME’s FedWatch data indicating a strong likelihood of a 25-basis-point cut in October and another in December. While inflation data due Friday is expected to show core CPI steady at 3.1% in September, no official has challenged the market’s pricing for cuts. Investors continue to weigh the implications of potential rate reductions against ongoing economic uncertainties.
As the week unfolds, global markets remain poised to react to key economic data, trade developments, and central bank policies, with a mix of optimism and caution shaping the landscape. The interplay between geopolitical risks, monetary policy, and corporate earnings will likely define the week’s trajectory.