Daily Summary: U.S.-China Tensions Trigger the Sharpest Sell-Off Since “Liberation Day” ✂️

U.S. indices are experiencing their steepest sell-off since April 4. The drop was triggered by a post from Donald Trump on TruthSocial, followed by reports of federal employee layoffs.

At the time of writing, the US500 is down 2.00%, the US100 is falling 2.70%, and the US2000 is down 2.40%. The U.S. dollar is also under pressure, with the USDIDX dropping 0.40%.

American stocks reversed earlier gains today after Donald Trump posted a message on TruthSocial warning of escalating trade tensions with China and the potential reintroduction of high tariffs.
In response, Beijing has sent letters to countries around the world, announcing plans to implement broad export controls on rare earth metals and other key raw materials.

The White House has begun large-scale layoffs of federal employees due to the ongoing government shutdown. Budget Director Russ Vought confirmed that staff reductions have officially started.

Fed’s Christopher Waller reiterated that inflationary pressure from tariffs is likely temporary, emphasizing the importance of upcoming inflation data (CPI) for future monetary policy decisions.
The Bureau of Labor Statistics (BLS) announced that the CPI report will be delayed until October 24, while all other macroeconomic data will remain suspended until the government resumes normal operations.

The University of Michigan’s October report shows a decline in 1-year inflation expectations to 4.6%, stable consumer sentiment at 55, and an improvement in the current economic conditions index to 61.

Comments from ECB members suggest that monetary policy remains stable and interest rates will be held at neutral levels, as the inflation target has been reached.

In September, Canada’s labor market positively surprised by adding 60,000 new jobs, marking a 0.3% increase. The unemployment rate held steady at 7.1%, and the labor force participation rate ticked up to 65.2%.

Norway’s annual inflation in September came in at 3.6%, beating both forecasts (3.5%) and the previous reading.

Italy's industrial production unexpectedly fell by 2.4% MoM in September, significantly worse than the projected 0.4% decline.

Oil prices are down nearly 4% on Friday, hitting their lowest level since May, primarily due to the ceasefire agreement between Israel and Hamas, which eased geopolitical risk and fears of supply disruptions from the Middle East.

Silver is up nearly 2%, attempting to close the session above the key $50 per ounce level.

Cryptocurrencies are falling in line with the broader market. Bitcoin is down over 3.00%, dropping below $118,000, while Ethereum is down 6.10%. The rest of the altcoin market is losing 2.40%.