Week in Review: China Trade Tensions Ease

However, Thursday saw renewed volatility as the Dow fell 300 points and the S&P 500 declined 0.6%, dragged lower by regional banks. The SPDR S&P Regional Banking ETF (KRE) dropped over 6%, marking its fourth consecutive weekly loss. Investor anxiety grew following the bankruptcies of auto-industry-linked lenders Tricolor and First Brands, coupled with allegations of loan-related fraud at two regional banks. The turmoil briefly drove the Cboe Volatility Index (VIX) to its highest level since April before easing on Friday.

U.S. Treasury yields declined across the curve, with the 10-year yield falling to its lowest level since October 2024. Safe-haven demand was further supported by ongoing concerns over the federal government shutdown, now entering its third week, with little progress in negotiations between parties.

In Europe, the STOXX Europe 50 Index gained 1.38%, buoyed by Powell’s dovish tone and easing U.S.–China trade tensions. The UK’s FTSE 100 declined 0.77%, despite data showing that GDP grew 0.1% in August, following a 0.1% contraction in July. The unemployment rate edged up slightly to 4.8%, indicating a modest loosening in labour market conditions.

Next week, markets will focus on developments in the U.S.–China trade dialogue, the ongoing government shutdown, and a range of key economic releases — including the U.S. CPI, PMI, and existing home sales reports. In Asia, attention will turn to China’s Q3 GDP and other key data points, while in Europe, investors will watch Euro Area consumer confidence and UK inflation figures. Monetary policy decisions from the central banks of Turkey, Indonesia, and South Korea will also be closely monitored.

Market Moves of the Week

South Africa is set to lift its long-standing moratorium on unconventional gas exploration, including shale resources, once new regulations are gazetted later this month, according to Petroleum Resources Minister Gwede Mantashe. The move is expected to reopen investment opportunities in the Karoo Basin, which the U.S. Energy Information Administration (EIA) estimates holds up to 390 trillion cubic feet of technically recoverable shale gas. The moratorium, in place since 2011, allowed for environmental and technical assessments amid concerns over hydraulic fracturing. Mantashe said the government has finalised a structured and transparent licensing framework under the Upstream Petroleum Resources Development Bill to ensure responsible exploration.

Investors will turn their focus to next week’s September CPI release for insight into domestic inflation trends. Headline inflation eased to 3.3% year-on-year in August from 3.5% in July. A Reuters poll forecasts a modest uptick to 3.5%.

Chart of the Week:

Most economies remain heavily reliant on China for rare earth metals, which are vital to a wide array of growing technologies—from batteries and smartphones to wind turbines. That’s why China’s moves last week to tighten curbs on these critical minerals, followed early Tuesday by new controls over companies involved in shipping them, landed as such an unwelcome surprise to the U.S. Credits: Strategiq