Market Update - 3 September 2025

Global markets experienced a week of heightened volatility and diverging performances as political uncertainties overshadowed economic data, with gold reaching new highs while equity markets showed mixed results across regions.

Safe Haven Assets Shine Amid Uncertainty

Gold emerged as the standout performer, surging 3.3% over the week to reach $3,545 per ounce on COMEX—up nearly 30% year-to-date. The precious metal's rally reflected multiple concerns weighing on investors: questions about Federal Reserve independence, ongoing geopolitical tensions, and uncertainty surrounding U.S. trade policy. 

Equity Markets Diverge

While attention has focused on U.S. markets, Chinese equities quietly outperformed, with the CSI 300 had another good week gaining around 3% despite mixed economic signals. This resilience came even as China's official manufacturing PMI remained in contraction territory, though private sector indicators showed improvement and corporate profits have been robust.

In contrast, developed markets struggled. The German DAX fell 1.9% for the week, while U.S. technology stocks faced pressure as doubts arose about the sustainability of AI infrastructure spending. Despite meeting expectations with revenue of $46.74 billion (up 56% quarter-on-quarter), Nvidia shares fell 5% after reporting.

Trade Policy in Legal Limbo

A significant development came from the U.S. appeals court, which ruled that President Trump's tariffs exceeded his authority, though they remain in place pending appeal until October 14. This legal challenge created additional uncertainty for businesses, particularly as Trump simultaneously escalated pressure on India with 50% tariffs on many goods unless the country stops purchasing Russian oil.

Europe moved quickly to comply with U.S. demands, fast-tracking legislation to remove tariffs on American industrial goods within a week, a move that could see reciprocal reductions in U.S. tariffs on European automobiles.

Central Bank Independence Under Scrutiny

Markets continued to grapple with challenges to Federal Reserve independence. Lisa Cook filed a lawsuit challenging her dismissal from the Fed board, while confirmation hearings for Stephen Moran proceeded. Despite these tensions, Fed officials maintained their focus on data, with the current favourite to replace Chair Powell and prior Trump appointee, Christopher Waller, signalling support for a September rate cut while dismissing the need for a 50-basis-point move.

Economic Data Points to Resilience

U.S. economic data painted a picture of moderate growth with persistent inflation concerns. GDP was revised upward to 3.3% annualised growth, while the PCE deflator showed core inflation creeping up to 2.9% year-on-year. The labour market remained relatively stable, with jobless claims at 229,000, below consensus expectations.

In Australia, inflation surprised to the upside at 2.8% annually, driven by electricity and travel prices, though the Reserve Bank maintained its wait-and-see approach. New Zealand showed unexpected resilience in business confidence surveys despite recent economic weakness.

Looking Ahead

As markets enter September, the convergence of political, economic, and geopolitical uncertainties continues to drive volatility. The steepening U.S. yield curve, with 30-year yields approaching 5%, suggests markets are pricing in longer-term inflation and fiscal concerns and this week’s US non-farm payrolls will be watched closely.