Global equities traded cautiously amid renewed geopolitical tensions and mixed economic signals. Major US and European stock indexes pulled back after a period of rotation out of risk assets, pressured by escalating fears over a US–Iran conflict, which boosted oil prices to a 6-month high, floating around $71–$72/bbl.
United States: Indices Slip, Macro Data and Geopolitical Tensions
US equities weakened on Thursday as risk sentiment soured ahead of Friday’s key economic releases. The Dow fell 0.54%, the S&P 500 slipped 0.28% and the Nasdaq declined 0.31%, breaking a 3-day winning streak. Investors have grown cautious amid geopolitical tensions and mixed macro signals.
The Fed’s preferred metric, core Personal Consumption Expenditures (PCE) was confirmed to remain above the Fed’s 2% target, with the most recent available data showing core PCE holding around 2.8% YoY. This higher reading signals that price pressures remain persistent in the broader economy, giving less room for aggressive rate cuts. Markets have been parsing these inflation figures closely, as they directly influence expectations for the timing of any future cuts.
Market forecasts ahead of today’s Q4 and 2025 GDP release pointed to slower growth in Q4 2025, with real GDP expected to increase roughly 3.0% annualised, down from the strong 4.4% pace in the third quarter.
Although still positive, a deceleration in GDP growth suggests that demand is moderating. This could soften inflation over time but adds complication to the narrative around monetary policy. If confirmed, this reinforces the view that the economy is cooling from earlier pandemic-era stimulus-driven expansions. The BEA will also release the Personal Income and Outlays data on Friday at 8:30 ET.
Europe: STOXX Slips as Earnings and Risk Weigh
European equities retreated from recent highs as earnings volatility and geopolitical risk dented sentiment. The STOXX Europe 600 fell 0.53% to ~625, while the Euro STOXX 50 dropped 0.72%. Germany’s DAX declined ~0.9%, France’s CAC 40 eased ~0.4%, and the FTSE 100 slipped ~0.6%.
Despite the pullback, earnings have been more resilient than feared, with 57% of STOXX 600 companies beating expectations so far, tempering concerns around a sharper profit slowdown. The euro edged lower against the dollar as investors rotated toward safety.
On the macro front, moderate growth continues across the EU, with indicators from the European Statistical Monitor showing ongoing expansion and improved sentiment, despite some sectors such as industrial production and retail trade softening.
Asia & ASX: Mixed Regional Tone, Energy and Miners Provide Support
East Asian markets were mixed as global risk sentiment cooled. Japan’s Nikkei 225 rose around 0.5%, supported by strength in exporters and value names, while Hong Kong’s Hang Seng eased roughly 0.7% and China’s Shanghai Composite slipped around 1%, reflecting continued caution around growth momentum and property-sector headwinds.
In Australia, the ASX 200 hit a fresh intraday record above 9,100 earlier in the week, driven by gains in energy, mining and the major banks. Rising oil prices supported names like Woodside and Santos, while financials remained firm on resilient earnings expectations.
However, futures pointed to a softer open Friday, down around 0.4–0.5%, tracking weaker U.S. leads and broader risk-off positioning.
The divergence highlights a regional split: Japan continues to benefit from rotation into cyclicals and a weaker yen backdrop, while Chinese markets remain more sensitive to domestic growth concerns.
Commodities: Oil Leads, Metals Settle Near Highs
Oil continued its surge, driven by heightened US–Iran conflict tensions and supply-risk premiums as there may be disruption to the Strait of Hormuz adding a “war premium”. Oil pushed above US$70–$71 per barrel extending gains over recent sessions as geopolitical risk remains elevated.
Precious metals remain near lofty levels as safe-haven demand persists. Gold has climbed close to US$5,000/oz, with prices up roughly 5% over the past month. Silver sits near US$78/oz and has also rallied amid uncertainty.
What To Watch Next
- US Core PCE Inflation: the Fed’s preferred inflation gauge will be key for rate expectations. A hotter-than-expected print could push yields higher and pressure equities, while softer data may revive rate-cut hopes.
- US GDP and Income Data: advance growth figures will help clarify if the economy is cooling or losing momentum and becoming sluggish.
- Middle East Developments: escalating or deescalating tensions could quickly shift oil prices and broader risk premium and sentiment.
- Treasury Yields & the US Dollar: bond market reactions to inflation data will guide equity positioning and currency flows, particularly in USD/JPY and commodity currencies like AUD. US dollar will also be a good gauge for safe haven flows.