Market navigator: week of 20 October 2025

Economic

Summary:

Markets stabilized as U.S. credit worries and trade tensions eased. U.S. stocks rose on strong earnings, Hang Seng fell, Bitcoin held $107K. Focus shifts to China GDP and U.S. CPI.

What happened last week

Cracks in the credit market: Credit market vulnerabilities emerged following bankruptcies of automotive finance provider Tricolor and auto parts manufacturer First Brands, impacting major institutions including JPMorgan and Jefferies. Regional banks Zions and Western Alliance disclosed non-performing loans linked to a California commercial real estate firm's insolvency. Risk-aversion flows compressed US two-year treasury yields to 3.42%, the lowest since May 2022, while 10-year yields fell below 4%. Gold briefly exceeded $4300.

US-China trade disputes: US-China trade relations show signs of easing following recent escalations over rare earth export controls, proposed 100% tariff increases, and cooking oil trade restrictions. US Treasury Secretary Bessent will meet with Chinese Vice Premier He in Malaysia this week, establishing groundwork for dialogue between the two presidents at the Asia Pacific Economic Cooperation summit in South Korea.

Lower reliance on US trade: Chinese exports grew 8.3% year-on-year (YoY) in September, the fastest in six months. Increased shipments to the European Union and Africa offset declining US exports, whilst imports rose 7.4% YoY, indicating stronger domestic consumption.

Weaker Australian labour market: Unemployment rose from 4.3% to 4.5% with 14,900 jobs added in September, below expectations of 20,000. This development complicates the Reserve Bank of Australia's monetary policy trajectory. Market-implied November rate cut probability jumped from 50% to 84%. Three-year government bond yields fell 16 basis points while AUD/USD dropped 0.5%.

Markets in focus

Robust earnings support US stocks

Major US equity indices demonstrated resilience, recovering swiftly from the previous week's decline as opportunistic buying interest emerged alongside encouraging third-quarter corporate earnings. The S&P 500 and Dow Jones Industrial Average advanced 1.7% and 1.6% respectively, while the technology-concentrated Nasdaq 100 gained 2.5%.

Financial sector earnings reports exceeded analyst projections on both revenue and profitability metrics. Robust expansion in investment banking services and sustained strength in trading constituted primary revenue drivers. Earnings per share for Goldman Sachs and Citigroup registered impressive growth of 46% and 48% respectively. However, the earnings announcements also conveyed cautionary signals, as JPMorgan Chief Executive Jamie Dimon disclosed a $170 million charge-off stemming from wholesale lending exposure to Tricolor. The proliferation of private credit assets and the notable increase in US banks' loan exposure to non-bank financial institutions in recent years are generating investor concern.

The emergence of credit events referenced above evokes memories of the regional banking crisis initiated by Silicon Valley Bank's collapse in 2023. The Volatility Index (VIX) maintained levels predominantly above 20 throughout the week, exhibiting significantly expanded intraday ranges. On Friday, the index touched 29.0 before moderating to 20.8 at the close.

Technical analysis of the US Tech 100 reveals recent price action has deviated from the ascending channel established since mid-May. Provided the index maintains levels above the 100-day moving average (MA) support, the uptrend is likely to continue with a resistance at the channel's upper boundary near 26,000. However, a breach below this support level may trigger testing of September's trough at 22,979.

Figure 1: US Tech 100 index (daily) price chart

as of 19 Oct 2025. Past performance is not a reliable indicator of future performance.

Trade tensions drive volatility in Hang Seng Index

The Hang Seng Index (HSI) continued its decline for the second consecutive week, retreating 4.0%, representing the weakest weekly performance since April. Southbound capital flows resumed, elevating market turnover on 13 October to HK$490.3 billion, the fourth-highest level in history.

The latest escalation in US-China trade disputes catalysed the sell-off and trigger notable sector rotation during this volatile period. Following the substantial year-to-date rally, numerous investors elected to secure profits, particularly from growth-oriented equities in biotechnology and artificial intelligence sectors. Information Technology, Communication Services, Health Care and Consumer Discretionary sectors registered the weakest performance within the Hang Seng Composite Index. Tencent and Alibaba both declined 7%, constituting the largest index detractors.

Conversely, buying interest concentrated in equities aligned with the 'valuation system with China characteristics' framework – typically referring to undervalued state-owned enterprises offering attractive dividend yields. The four major state-owned banks and three main Chinese telecommunications operators all generated positive returns during the week.

The previous week's retracement drove the HSI below the 50-day MA, simultaneously derailing the ascending channel established since mid-April. The index is exhibiting characteristics consistent with corrective Wave A under Elliott Wave theory, currently positioned marginally above the 78.6% Fibonacci retracement of Wave 5 at 25,035. Should the 100-day MA fail to provide support, the index may test August's low at 24,372. Conversely, a rebound above the 100-day MA could propel the index towards the 20-day MA at 26,392.

Figure 2: Hang Seng Index (daily) price chart

as of 19 Oct 2025. Past performance is not a reliable indicator of future performance.

Bitcoin tests critical support level

Bitcoin, alongside the broader cryptocurrency asset class, has experienced downward pressure as market volatility intensified and risk appetite diminished. According to Coinglass, cryptocurrency liquidations on 11 October exceeded $19 billion, establishing a record for the largest single-day liquidation event. The sell-off was initiated by US intentions to implement 100% tariff rates on Chinese goods.

Sentiment towards Bitcoin remains subdued. Exchange-traded fund (ETF) flow data reveals net outflows of $1.2 billion during the previous week. Fundamental factors previously supportive of Bitcoin valuations similarly demonstrate limited improvement. Three months following passage of landmark US stablecoin legislation (the Genius Act), implementation progress has proven slower than anticipated. Government shutdown disruptions have resulted in regulators deprioritising finalisation of crucial details including rewards programmes, reserve requirements, and non-bank issuer regulations. Passage of the Digital Asset Market Clarity Act of 2025, which would establish comprehensive regulatory frameworks for the cryptocurrency industry beyond stablecoins, will likely be postponed to 2026.

Technical analysis indicates Bitcoin is currently maintaining an important support level near $107,000. This level approximates the local trough established on 1 September and coincides with the 200-day MA. Failure to hold this support could trigger a substantial correction towards $100,000. Conversely, a rebound from current support levels could propel Bitcoin back towards September highs near $180,000.

Figure 3: Bitcoin (daily) price chart

as of 19 Oct 2025. Past performance is not a reliable indicator of future performance.

The week ahead

This week centres on China's economic trajectory and critical inflation data that will shape monetary policy expectations across major economies, alongside pivotal corporate earnings from technology sector leaders.

China's third-quarter gross domestic product (GDP) data headlines Monday's releases, with markets anticipating growth of 4.8% YoY – marking a deceleration from the second quarter's 5.2% expansion. The previous two quarters exceeded Beijing's 5% annual growth target, but mounting deflationary pressures and subdued consumer confidence suggest momentum is fading in the latter half of 2025. Accompanying industrial production and retail sales figures will provide essential insights into the strength of manufacturing activity and household spending patterns. Should GDP undershoot the 4.8% consensus, it would intensify pressure on policymakers to deploy additional stimulus measures.

The Communist Party's Fourth Plenum of the 20th Central Committee convenes Monday, where senior personnel changes will be announced and the next five-year plan establishing China's social and development priorities for 2026-2030 will be deliberated. The gathering assumes particular significance given unsettling US trade tensions and persistent structural domestic headwinds. Any signals regarding strategic priorities – particularly around technology self-sufficiency, domestic consumption stimulus, or demographic challenges – would prove consequential for markets assessing China's long-term growth trajectory.

Japan faces political uncertainty as the Diet's extraordinary session Tuesday may determine the country's next prime minister following recent coalition dynamics. Liberal Democratic Party (LDP) President Sanae Takaichi could become Japan's first female prime minister if she secures sufficient support beyond the LDP and its newly formed alliance with Ishin, requiring at least two additional votes in the Lower House to command a majority.

US consumer price index (CPI) data will be released on Friday after being delayed by the ongoing government shutdown, just in time for the Federal Reserve's assessment before its policy meeting on 28-29 October. Markets project core CPI will maintain its 3.1% YoY pace, while headline inflation rate is expected to accelerate from 2.9% to 3.1% YoY. Should inflation exceed expectations, markets may recalibrate rate cut probabilities for the remainder of 2025. Currently, the market is pricing in a 100% probability of a rate cut in October.

Flash purchasing managers' index (PMI) readings across major economies Friday will offer preliminary assessments of October business activity.

Corporate earnings attention focuses on Netflix and Tesla reporting Tuesday and Wednesday respectively. Netflix's content performance and advertising revenue trajectory will indicate subscription economy health, whilst Tesla's results will provide crucial perspectives on electric vehicle demand dynamics and the company's ability to maintain margins amid intensifying competition.

Figure 4: China's retail sales, industrial production and property sales all point to a slower GDP growth in Q3

Retail sales and industrial production data are not published in January

Source: ig

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Market navigator: week of 20 October 2025

What happened last week

Markets in focus

as of 19 Oct 2025. Past performance is not a reliable indicator of future performance.

as of 19 Oct 2025. Past performance is not a reliable indicator of future performance.

as of 19 Oct 2025. Past performance is not a reliable indicator of future performance.

The week ahead

Retail sales and industrial production data are not published in January

Source: ig

Risk Disclosure