Global Economic Snapshot

• •UK unemployment edged up to 4.8% (vs 4.7% expected), hinting at cooling labor momentum despite steady wage growth.
• •Germany’s CPI held at 2.4% y/y, suggesting inflation is stabilizing but still not comfortably within the ECB’s target zone.
• •Australia’s unemployment rate rose to 4.5% (expected 4.3%), underscoring slack in the labor market as the RBA stays cautious on policy easing.
• •Eurozone trade surplus shrank sharply to €1.0bn from €12.4bn, another reminder of the bloc’s fragile export performance amid weak global demand.

Trump Declares ‘Dawn of a New Middle East’

U.S. President Donald Trump’s address to the Israeli Knesset drew global attention, describing it as “the historic dawn of a new Middle East.” He declared Israel’s military campaign a triumph and urged the region to translate these victories into peace and prosperity.

U.S.–China Trade Front Heats Up

Trade tensions flared again, with rhetoric on both sides hardening.

• • Bessent confirmed the U.S. has been “aggressively pushing back” against China’s export controls, emphasizing coordination with allies including India.
• • Beijing retaliated, imposing a US$1.7 million “special port fee” on a U.S.-linked container ship docking in Shanghai — the first case under its new fee structure.
• • China’s commerce ministry accused Washington of wrong practices and urged sincerity in trade talks.

The moves add fresh uncertainty to global supply chains and signal that both economies are digging in for a prolonged, policy-driven standoff rather than a quick resolution.

Fed’s Tone: Gradual Cuts, Growing Caution

In her first policy remarks as Chicago Fed President, Anna Paulson said she favors a gradual path of rate cuts through 2025, arguing that the Fed’s focus should now shift toward supporting the labor market.

Chair Jerome Powell echoed that caution, noting that while growth has held up, there is no risk-free path for policy. He acknowledged tariffs are adding to price pressures and hinted that balance sheet contraction could conclude in the coming months.

Meanwhile, the October Beige Book painted a subdued picture — three districts reported modest growth, five saw no change, and four noted slight softening. The report reinforced the idea that, despite market optimism, the real economy isn’t re-accelerating yet.

Tariffs Reignite the Inflation Debate

Goldman Sachs warned that Trump’s trade measures have become a key driver of U.S. inflation, estimating that tariffs could add up to one percentage point to core PCE, keeping it near 3% through late 2025.

Without the tariff impact, Goldman argues, inflation would likely be closer to the mid-2% range — meaning price stickiness is being imported, not domestically generated.

Adding a rare note of dissent, Congresswoman Marjorie Taylor Greene cautioned that tariffs and mass deportations risk backfiring on U.S. businesses and workers, warning of higher costs and labor shortages. Her comments highlight a growing divide within the administration’s economic camp between protectionist goals and pragmatic business interests.

US Government Shutdown Hits Equity Markets

The ongoing US government shutdown is increasingly weighing on equity markets, with the Dow, S&P 500, and Nasdaq all recording consecutive weekly losses. This marks a significant departure from prior shutdowns that often saw markets shrugging off disruptions. The current impasse is exacerbating market volatility and investor caution due to missing key economic data releases, including employment and inflation reports, which limits the Fed’s ability to gauge the economy’s true health over already elevated valuations.

Gold and Silver Extend Their Rally

Precious metals continued their strong run this week, supported by a weaker dollar outlook and demand for hedges against policy volatility.

• •Gold traded above $4,300
• •Silver crossed $54

Bank of America reiterated its bullish forecast, projecting gold at $5,000 and silver at $65 by 2026. Analysts pointed to widening U.S. fiscal deficits, rising debt burdens, and political pressure for lower rates as the core drivers sustaining the rally.

Markets are ending the week in a fragile balance, weighed down by policy uncertainty, ongoing trade tensions, and geopolitical developments. The US government shutdown has added further strain on sentiment. Meanwhile, gold and equities are sending contrasting signals, with the interplay between political risk and monetary policy shaping market direction as we head into the final quarter of 2025.

Disclaimer

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