Closing Recap

U.S. stocks finished mixed after a remarkable intraday reversal, with the Dow and small caps rallying while the Nasdaq lagged, as investors aggressively bought the dip on easing U.S.-China trade fears and dovish Fed commentary; gold surged to another record, oil fell, and Treasury yields slipped. In the currency markets, the Japanese Yen surged as a political crisis in Tokyo prompted a rapid unwind of “Abenomics 2.0” trades, causing USD/JPY to tumble, while the U.S. dollar was on the defensive against the Euro, with the Euro firming above 1.16 on dovish Fed commentary, and ahead of the Fed’s Beige Book. Bitcoin remained under pressure.

Key Takeaways 

• Massive Intraday Reversal: Stocks staged a powerful rebound from sharp morning lows, with the S&P 500 erasing a 125-point deficit, as “buy the dip” sentiment prevailed. 
• Trade Tensions Ease (For Now): Markets rallied after USTR Ambassador Greer confirmed a Trump-Xi meeting is scheduled, easing immediate fears of further tariff escalation, despite a late-day threat from Trump. 
• Gold Surges to New All-Time High: Gold prices climbed over 0.7% to settle at a new record of $4,163.40 per ounce, fueled by the ongoing U.S. government shutdown, dovish Fed expectations, and geopolitical risks. 
• Powell’s Dovish Tone: Fed Chair Powell’s comments suggesting that a sharp slowdown in hiring poses a growing risk to the economy were seen as dovish, reinforcing expectations for more rate cuts. 
• Dollar Weakens: The U.S. dollar ended near its lows, with the EUR/USD firming above 1.16 and the safe-haven Japanese Yen gaining as renewed U.S.-China trade tensions dented risk sentiment. 
• YEN rebounds:The Japanese Yen was the main story in forex, surging across the board as the collapse of Japan’s ruling coalition sparked a sharp unwind of weak-yen bets, sending USD/JPY tumbling from above 153.00 to near 151.00.
• Bitcoin Remains Under Pressure:Bitcoin prices pulled back, with BTC dropping below $113,000, extending its weekly loss to nearly 9% as the market appeared to stabilize from last week’s “Great Reset.” 
• Oil Prices Fall on IEA Report: Crude oil prices declined after the IEA forecasted a massive oversupply in the market for next year. 
• Yields Slip: Treasury yields fell, with the 10-year yield dropping to near 4.01%, as investors sought safety amid trade concerns and priced in a more dovish Fed. 

Market Overview

U.S. equity markets executed a stunning reversal today, with major indices recovering from steep morning losses to finish mixed. The session began with a sharp sell-off, with the S&P 500 down as much as 125 points and the Dow plunging 600 points, as renewed U.S.-China trade tensions rattled investors. China’s imposition of sanctions and tightening of rare earth export licenses overnight sent Asian markets tumbling and created a significant risk-off mood. 

However, the “buy the dip” mentality, a hallmark of the recent market, returned with force. The turnaround was sparked by comments from U.S. Trade Representative Jamieson Greer, who confirmed on CNBC that a meeting between President Trump and Chinese President Xi is still scheduled for the end of October. This, combined with dovish commentary from Fed Chair Jerome Powell, who highlighted the growing risks from a slowing labor market, was enough to embolden buyers. Stocks catapulted off their lows, with the Dow finishing up over 200 points and the Russell 2000 leading the charge higher. The Nasdaq, however, which had been the hardest hit, still finished in the red. 

Index	Up/Down	% Change	Last
DJ Industrials	203.54	0.0044	45271
S&P 500	-10.34	-0.0016	6644
Nasdaq	-172.91	-0.0076	22521
Russell 2000	34.08	0.0138	2495

The most significant global macro story, however, was the political upheaval in Japan. The Komeito party’s withdrawal from the ruling coalition has fractured the government, leaving incoming Prime Minister Sanae Takaichi’s pro-stimulus “Abenomics 2.0” agenda in doubt. This has triggered a sharp unwind of popular trades: the Japanese Yen has strengthened notably (USD/JPY fell from over 153 to below 152), and the Nikkei 225 has pulled back over 2,000 points from its recent record high. 

The day’s events underscored the market’s extreme sensitivity to the U.S.-China trade narrative and Federal Reserve policy expectations. Despite a late-day tweet from President Trump threatening to terminate some business with China over their trade practices, the market held onto the majority of its gains. The U.S. government shutdown, now in its 14th day, remains a background concern, with the primary impact being the delay of key economic data.

Economic Calendar 

With the U.S. government shutdown now on Day 14, there were no official U.S. economic data releases. The market continues to operate in an information vacuum, relying on central bank commentary, private surveys, and political headlines for direction. The U.S. economic calendar is bare today. The main event is the Fed’s Beige Book, which may get more attention due to the government shutdown delaying other data. 

• 18:00 GMT – Fed Beige Book Release. 
• A heavy slate of central bank speakers from the Fed, ECB, and Bo,  including Miran, Waller, and Schmid.
• Key This Week: Q3 Earnings Season Continues: Reports from major banks tomorrow (BAC, MS, PNC). 

Commodities, Treasuries and Currencies 

In other markets, Gold is once again the star performer, surging 1.3% to a fresh record high of $4,196 as it closes in on the $4,200 milestone. The precious metal is poised for its ninth straight week of gains. The rally was driven by strong safe-haven demand from the U.S. government shutdown, renewed U.S.-China trade tensions, and dovish Fed expectations. Crude oil prices fell, with WTI settling down $0.79 (-1.33%) at $58.70/bbl, after the IEA released a report forecasting a massive oil market surplus next year. 

In the currency markets, the U.S. Dollar Index (DXY) was on the defensive, falling -0.25% to near 99.00, as the Euro and safe-haven currencies like the Yen and Swiss Franc gained ground on the back of renewed trade tensions. The Japanese Yen was the standout performer, strengthening significantly as political turmoil in Japan led traders to unwind “Abenomics 2.0” positions. The USD/JPY pair plunged from recent highs above 153.29 to trade back towards 151.00. The U.S. Dollar Index (DXY) was on the defensive, falling -0.25% to near 99.00, as the Euro firmed above 1.16 on dovish Fed commentary.

Asset	Change	Unit	Last
WTI Crude	-0.79	USD/bbl	58.7
Gold	30.4	USD/oz	4163.4
EUR/USD	0.0035	USD	1.1603
USD/JPY	-0.6	JPY	151.67
US 10-Yr Yield	-3.2 bps	%	0.04018

We’re seeing a significant unwind of recent trends:

• USD/JPY: The pair has fallen sharply to the 151.00 level as the political turmoil in Japan forces a rapid unwinding of the pro-stimulus, weak-Yen trade that dominated the start of the week. With the “Sanaenomics” agenda now in doubt, the Yen is regaining its safe-haven appeal. 
• EUR/USD: The Euro is showing signs of life, climbing back above 1.1600. The pair is benefiting from a softer U.S. Dollar and a temporary reprieve in the French political crisis. A massive $4.1B options expiry at the 1.1600 level for today’s New York cut provides a huge magnet and a formidable support floor for the session. 
• GBP/USD: Sterling is advancing towards 1.3350, supported by the dovish Fed narrative. However, the upside may be limited as signs of a cooling UK labor market are boosting expectations for more rate cuts from the Bank of England later this year.

U.S. Treasury yields slipped, with the 10-year yield falling about 2 basis points to 4.018%, as investors sought safety amid the trade concerns and priced in a more dovish Fed. Bitcoin prices continued to slide, falling -2.8% to below $113,000.

Looking Ahead 

The market will continue to be highly sensitive to any further developments in U.S.-China trade relations and the political situation in Japan. Q3 earnings season ramps up tomorrow with reports from major banks including Bank of America, Morgan Stanley, and PNC, which will provide crucial insights into the health of the U.S. economy and financial system. The release of the Fed’s Beige Book this afternoon and commentary from a host of Fed speakers will also be closely watched for policy clues, especially with official government data still on hold due to the shutdown. The reversal in Japanese markets is the most significant new development. Traders will be watching to see if the Yen can sustain its rally and if the Nikkei’s pullback deepens, which could have broader implications for global risk sentiment.

Today’s enormous $4.1 billion expiry at the 1.1600 strike in EUR/USD is a major factor. This level is likely to act as a powerful anchor for price action, potentially containing the pair and providing a key support zone. Yesterday’s incredible intraday reversal demonstrated the immense power of the “buy the dip” crowd. The key test will be whether this sentiment can withstand another wave of negative headlines or if the market is finally becoming exhausted.