Closing Recap

U.S. stock futures are pointing to a higher open, extending last week’s rebound as investors embrace signs of U.S.-China trade de-escalation ahead of a heavy earnings week; gold is easing, oil is firming, and the dollar is subdued amid ongoing government shutdown concerns. In the currency markets, the Japanese Yen is seeing significant volatility as a new coalition government is formed in Tokyo, while the Euro is under pressure from political turmoil in France and a sovereign credit downgrade, and the British Pound is range-bound. Bitcoin, meanwhile, has rebounded to above $115,000. 

Key Takeaways 

• Futures Point Higher on Trade Hopes: U.S. stock futures are gapping higher, with the Nasdaq leading the charge, as positive signals from both Washington and Beijing over the weekend boost hopes for a trade truce. 
• “TACO” Trade Roars Back: President Trump’s optimistic comments ahead of his meeting with President Xi this week have reignited the “TACO” (Trump Accepts Chinese Offer) trade, fueling a powerful risk-on mood across global markets.
• Assia session: The Asian session was a sea of green, led by a powerful rally in Japan’s Nikkei 225, which surged 2.2% to a new record high above 50,000.
• Government Shutdown Enters Fourth Week: The U.S. government shutdown is now in its 26th day, raising concerns about its economic impact and delaying key data, which is keeping a lid on the U.S. dollar. Prediction market Kalshi forecast a 46 days of government shutdown – the largest in US history. 
• Heavy Earnings Week Ahead: Investor focus shifts to Q3 earnings, with major reports from Netflix, Coca-Cola, Amazon, and Intel on deck. 
• Gold Eases from Highs: Gold prices are pulling back from recent record highs as immediate trade fears recede, though underlying support remains from dovish Fed bets and shutdown uncertainty. 
• Yen Weakens as Focus Returns to Policy Divergence:The Japanese Yen is volatile, with USD/JPY gapping lower before reversing higher as Japan’s new pro-stimulus Prime Minister is confirmed, while the Euro is pressured by a French credit downgrade and the British Pound is quiet. 
• Bitcoin and Risk Assets Rally: The risk-on mood is lifting cryptocurrencies, with Bitcoin breaking out of its recent range to trade above $115,000, tracking the rally in equity markets. 
• Oil Prices Firm: Crude oil prices are trading higher, supported by the positive trade sentiment and ongoing geopolitical risks. 
• Yields Rebound: Treasury yields bounced back on Friday after dropping to key support levels earlier in the week, as a combination of decent regional bank earnings and softer trade rhetoric soothed sentiment. 

Market Overview

The market is kicking off the new week in a decidedly risk-on mood, with U.S. stock futures pointing to a strong open as hopes for a U.S.-China trade deal intensify. The optimism stems from a series of positive comments from President Trump over the weekend, who expressed confidence that he will “come away with a deal” from his meeting with President Xi Jinping later this week. Sentiment improved significantly over the weekend after President Trump appeared optimistic about a potential trade deal ahead of his meeting with Chinese President Xi Jinping later this week in South Korea. This has led traders to believe that Trump’s threat of an additional 100% tariff on Chinese goods beginning November 1st may be averted, sparking a rebound in risk assets. 

Index	Up/Down	% Change	Last
DJ Industrials	472.51	0.0101	47207.12
S&P 500	53.25	0.0079	6791.69
Nasdaq	263.07	0.0115	23204.87
FTSE 100	9,645.62	67.05	0.70%
DAX	24,239.89	32.1	0.13%

This has reignited the “TACO” trade, where the market bets on a de-escalation of trade tensions. The positive sentiment is powerful enough to overshadow the fact that the U.S. government shutdown is now entering its fourth week. With the Fed in its pre-meeting blackout period and a light data calendar, U.S.-China headlines are the undisputed driver of market action. The strong close on Friday, which saw U.S. stocks hit fresh record highs, has set a bullish tone that looks set to continue. Japan has confirmed a new coalition government, paving the way for a pro-stimulus Prime Minister, while in France, a recent credit downgrade by S&P is weighing on the Euro. 

With the U.S. data calendar still disrupted by the shutdown, the main focus for investors this week will be the heavy slate of Q3 corporate earnings reports, with several large-cap companies, including Netflix and Tesla, set to provide results.

Economic Calendar

The U.S. economic calendar is very light today. The focus remains on Q3 earnings and any developments regarding the government shutdown. Today is a very quiet day on the economic calendar, with the market squarely focused on risk sentiment and political headlines. While key data from the BLS and Census Bureau remains offline due to the shutdown, other U.S. reports are still scheduled for release:

• 09:00 GMT – German IFO Business Climate (Oct). 
• 12:30 GMT – U.S. Durable Goods Orders (Sep). 
• 14:30 GMT – U.S. Dallas Fed Manufacturing Index (Oct).
• Central Bank Meetings This Week: Fed (Wednesday), BoJ (Thursday), ECB (Thursday).

Data released overnight:

• China Industrial Profits (Sep): Surged +21.6% year-over-year, the strongest growth since November 2023, bolstering confidence in the Chinese economy. 
• Japan Services PPI (Sep): Accelerated to +3.0% year-over-year, beating expectations and reinforcing the Bank of Japan’s view that wage pressures are building. 
• U.S. Data: The government shutdown continues, and there are no official U.S. data releases scheduled for today.

Commodities, Treasuries and Currencies 

The risk-on mood is weighing heavily on precious metals. After a historic nine-week rally, Gold is experiencing significant profit-taking, with prices sliding 1.3% to $4,060, as the improved risk sentiment from easing U.S.-China trade tensions reduces demand for safe-haven assets. Silver is also struggling, testing support near $47.50. In contrast, WTI Crude Oil is trading with a firmer tone above, with WTI up near $61.57/bbl, supported by the positive trade sentiment and ongoing geopolitical risks. 

Asset	Change	Unit	Last
WTI Crude	0.06	USD/bbl	61.56
Gold	-55.4	USD/oz	4082.4
EUR/USD	-0.0008	USD	1.1623
USD/JPY	0.16	JPY	153.02
US 10-Yr Yield	+1.6 bps	%	0.04039

The currency market is in a clear risk-on mode, with the U.S. Dollar starting the week on the back foot and commodity currencies like the Australian Dollar outperforming. 

• USD/JPY: The pair is rallying strongly, climbing above 153.00 to its highest level since October 10th. The Japanese Yen is under heavy pressure as traders prioritize the pro-stimulus “Sanaenomics” agenda and the prospect of a delayed BoJ rate hike over the hot domestic inflation data. 
• EUR/USD: The Euro is struggling for direction, trading in a narrow range near 1.1620. The pair is caught between a weaker U.S. Dollar and its own internal headwinds, including the ongoing political turmoil in France. A minor $830M options expiry at the 1.1620 level could help to pin price action today. 
• GBP/USD: Sterling is on the back foot, giving in to a resurgence of U.S. Dollar strength. The pair is gearing up for a huge week of central bank decisions from both the Fed and the Bank of England.

U.S. Treasury yields are modestly higher, with the 10-year yield up about 1.6 basis points to 4.039%, as the risk-on mood weighs on bond prices. Bitcoin is a major beneficiary of the risk-on sentiment, breaking out of its recent range to trade above $115,000, driven by the improved risk sentiment from easing U.S.-China trade tensions.

Looking Ahead 

The market will be entirely driven by Q3 earnings reports this week, particularly from major tech names like Netflix and Amazon. Any guidance from these companies on the impact of trade tensions and the economic outlook will be critical. The primary macro focus remains on the U.S. government shutdown and any progress toward a resolution. What to watch: 

• U.S.-China Trade Headlines: This is the only game in town. The market is positioned for positive news. Any headlines that either confirm or contradict the optimistic narrative ahead of the Trump-Xi meeting will be the primary driver of volatility. 
• Central Bank Week: This is a huge week for central banks. While the Fed is widely expected to cut rates, the market will be highly sensitive to the forward guidance from all three major central banks, especially given the data vacuum in the U.S. 
• Gold’s Correction: The sharp pullback in gold is a significant development. Traders will be watching to see if this is a healthy correction after a parabolic run or the start of a more meaningful top. The reaction to the Fed decision will be a crucial test. 
• AUD/USD as a Risk Proxy: The Australian Dollar, which gapped higher at the weekly open, is a key barometer for U.S.-China trade sentiment. Watch the Aussie for real-time clues on how the market is interpreting the latest headlines. A large $2.5B options expiry at the 0.6490 level could provide a floor on any pullbacks.