US equities slide as trade fears resurface

General market commentary

US equity markets fell sharply on Friday, erasing earlier weekly gains after President Trump said the United States may raise tariffs on imports from China and is considering cancelling a meeting with President Xi. His comments followed Beijing’s new export controls on rare-earth minerals, key materials used in semiconductors, defence and battery production. The announcement unsettled investors and led to broad-based declines across sectors, with technology and consumer discretionary shares falling the most, likely reflecting some profit-taking after recent strong performance. Consumer staples were the only sector to finish broadly higher. The S&P 500 dropped by 2.7% on Friday, its worst session in several weeks, leaving the index slightly lower for the week after earlier midweek gains. Bond yields also declined, with the 10-year US Treasury yield falling to 4.06%, while the US dollar weakened against major currencies and oil prices hovered near five-month lows as a ceasefire in Gaza reduced supply risks.

Overall, markets are contending with a combination of political and economic headwinds, including the continuing government shutdown, escalating trade tensions and anticipation of the upcoming corporate earnings season. Investors are looking ahead to earnings reports from major banks this week, with S&P 500 companies expected to post around 8% year-on-year earnings growth. Broader improvements across sectors could help balance market performance and strengthen the case for diversification. Yet with valuations elevated and the onset of October bringing historically higher volatility, sentiment remains fragile. Shares are likely to stay sensitive to developments in trade policy, inflation data and central bank decisions, even as investors retain a cautiously optimistic view of the economic outlook heading into 2026.

Latest market and economic update

Asian equities fell broadly on Monday amid renewed U.S.–China trade tensions. Hong Kong’s Hang Seng led losses, dropping 2.3% as tech giants slid. Mainland Chinese indices also declined nearly 1%. Elsewhere, South Korea, Australia and Singapore weakened, while Japan’s markets were shut and Nikkei futures rose 1.5% on political developments.

US equity futures rose sharply overnight after Donald Trump struck a calmer tone on China, easing trade war fears. S&P 500, Dow, and Nasdaq futures gained up to 1.6% following last week’s heavy losses. Optimism was capped by an ongoing U.S. government shutdown and caution ahead of major bank earnings reports this week.

European equities fell for a second day on Friday, with the Stoxx 50 and Stoxx 600 down around 1%. Defence shares led losses following a US-brokered Middle East ceasefire, while mining equities also declined. Major movers included Leonardo -5.6%, Rheinmetall -2.5% and Thales -2.4%. On the upside, luxury and consumer goods shares saw modest gains.

The U.S. dollar rebounded on Monday as hopes grew that Washington might ease trade tensions with China. The dollar index rose to 99.002, retracing earlier losses, while the euro weakened to $1.1609 amid political developments in France. Market sentiment remained cautious, influenced by global uncertainty and limited liquidity due to U.S. and Japanese holidays.

Oil prices rose nearly 2% in Asian trade this morning after Friday’s steep losses, as Trump eased U.S.–China trade tensions. Brent reached $63.78 and WTI $59.95 per barrel. Markets remain cautious amid oversupply concerns, with U.S. output forecasts hitting record highs and OPEC+ planning gradual production increases, despite a Middle East ceasefire easing geopolitical risks.

China’s exports rose 8.3% in September, beating forecasts, as manufacturers expanded beyond the U.S. amid trade tensions. Imports grew 7.4%, while the trade surplus narrowed to $90.45 billion. Despite resilient exports, domestic demand stayed weak, prompting Beijing to pledge 500 million yuan in investment support to bolster the slowing economy.

President Emmanuel Macron reappointed Sebastien Lecornu as French prime minister amid the country’s political crisis, prompting mixed reactions. Lecornu vowed to deliver a budget and restore stability, while far-right, socialist and green leaders criticised the move as undemocratic farce. Supporters praised his experience and urged political forces to cooperate for national stability.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Warner Bros Discovery has rejected Paramount Skydance’s initial takeover bid of around $20 per share, considering it too low, Bloomberg reported. Paramount, led by David Ellison, is exploring options including increasing the offer, appealing to shareholders or securing support from financial partners such as Apollo Global Management. Warner Bros declined to comment.

AstraZeneca is set to announce a deal with President Trump to lower drug prices in the United States, making it the second pharmaceutical company, after Pfizer, to reach such an agreement. Details remain undisclosed. The initiative aims to shift costs to other wealthy nations, while AstraZeneca continues its $50 billion US investment and manufacturing expansion.

Lululemon founder Chip Wilson has intensified criticism of the company’s board, blaming it for strategic missteps and declining market value. He may collaborate with activist investors to push for board changes and has potential candidates in mind. Lululemon, whose shares has fallen over 50% in five years, defended its leadership and growth strategy.

Wedbush analyst Dan Ives views Friday’s tech sell-off as a short-term market reaction rather than a lasting threat. He describes the US-China tensions as a “high stakes poker” game but remains bullish on semiconductor, software, and Big Tech equities. Ives sees current weakness as a buying opportunity, predicting tech shares could rise 7% or more by year-end.

RBC Capital Markets raised Tesla’s price target to $500, factoring in its Optimus humanoid robot. Analysts estimate Tesla could capture 5% of a $9 trillion global humanoid market by 2050, primarily in consumer, manufacturing, logistics, and hospitality segments. Humanoids account for 36% of Tesla’s valuation, with Robotaxi and FSD contributing 37% and 11% respectively.

Bank of America maintained a Buy rating on AMD with a $250 price target, citing strong AI demand visibility. OpenAI’s first 1GW deployment on MI450 racks is on track for 2H26, potentially expanding to 6GW by 2030. AMD’s GPUs, CPUs and DPUs could drive incremental revenue, boost gross margins, and support long-term operating margin growth toward mid-30%.

Macquarie upgraded Baidu to Outperform, citing undervalued AI and chip assets. Its Kunlun AI chips could represent a third of Baidu’s value, with revenue expected to reach Rmb5 billion in 2025 and double in 2026. The brokerage highlighted growth in AI cloud services and robotaxis, raising Baidu’s price target to $176 despite declining search revenue.

Goldman Sachs downgraded ArcelorMittal to neutral, citing full valuation after strong gains. The steelmaker benefits from raw material deflation, EU safeguards, and project growth, but high energy costs and weak near-term demand limit upside. Further gains depend on policy catalysts, EU measures, and market developments.

Upcoming data and events

This week, markets will focus on the start of the US earnings season, with major banks including Citigroup, Goldman Sachs, JPMorgan Chase, Wells Fargo, Bank of America, and Morgan Stanley reporting results. Key economic data may remain limited due to the US government shutdown, while global attention turns to China’s trade and inflation, Eurozone and UK data, and the IMF’s World Economic Outlook.

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