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10 October 2025

Weekly Market View

The make-or-break earnings season

The US Q3 earnings season comes at an opportune time. Investor positioning and valuations in US equities are stretched after global equities scaled record highs.

The USD has bounced 3% after hitting a 3-1/2-year low in September thanks to the continued government shutdown, and renewed political and policy uncertainty in France and Japan.

Meanwhile, the gold rally has accelerated in recent weeks, with the precious metal crossing USD 4,000/oz for the first time, amid renewed concerns about fiat currencies due to increasing dominance of fiscal policy across Developed Markets.

We expect US earnings to beat expectations again on the back of the AI-driven investment wave, sustaining the equity rally over the next 6-12 months.

Nevertheless, this global set-up warrants a diversified allocation across asset classes and regions, with hedges. Gold, while facing a near-term road bump due to one-sided (bullish) positioning, remains a key portfolio hedge.


Add US equities, tech sector on dips – strong earnings beats expected

Lock in yields on 5-7-year maturity bonds – France, Japan fiscal concerns overblown

Trim excessive exposure on gold, buy on dips – risk of short-term pullback, bullish long-term

Charts of the week: Earnings bright spot as currencies lose value

US corporate earnings remain a big driver of equity returns, even as gold’s surge signals devaluation of fiat currencies

Performance of key currencies vs. gold and silver since 2022

US quarterly earnings/earnings estimates Q2 25 to Q4 26

Source: Bloomberg, LSEG I/B/E/S, Standard Chartered

Editorial

The make-or-break earnings season

Strategy summary: The US Q3 earnings season comes at an opportune time. Investor positioning and valuations in US equities are stretched after global equities scaled record highs. The USD has bounced 3% after hitting a 3-1/2-year low in September thanks to the continued government shutdown, and renewed political and policy uncertainty in France and Japan.

Meanwhile, the gold rally has accelerated in recent weeks, with the precious metal crossing USD 4,000/oz for the first time, amid renewed concerns about fiat currencies due to increasing dominance of fiscal policy across Developed Markets. We expect US earnings to beat expectations again on the back of the AI-driven investment wave, sustaining the equity rally over the next 6-12 months. Nevertheless, this global set-up warrants a diversified allocation across asset classes and regions, with hedges. Gold, while facing a near-term road bump due to one-sided (bullish) positioning, remains a key portfolio hedge.

Gold’s surge puts fiat currencies under scrutiny: Our chart above shows all is not well with the world’s leading currencies. The surge in gold and silver over the past three years is essentially a devaluation of the world’s fiat currencies. While the JPY and USD have devalued the most among the majors, other currencies such as the EUR, GBP and CHF are not too far behind. The primary concern is governments worldwide are increasingly relying on fiscal policy to stimulate and sustain growth, raising the risk of a return to the inflationary 1970s.

Enter US, French and Japanese politics. The US government shutdown has entered its second week. Meanwhile, France’s persistent collapse in governments on failure to agree on budget cuts is raising the prospect of more fiscal loosening, while Germany is structurally loosening its historically tight fiscal policies. Japan’s ruling party’s surprise election of stimulus-proponent Takaichi as the next prime ministerial candidate has revived hopes of more fiscal stimulus.

US leading the way. The US is the leading proponent of fiscal easing as it continues to run a fiscal deficit above 6% when the economy is growing above trend. The budget for the new fiscal year which started on 1 October will add to those deficits. President Trump’s efforts to gain control over the Fed reinforces concerns about fiscal dominance as it harks back to former President Nixon’s pressure on former Fed Chair Burns to engage in expansionary monetary policies in the 1970s. Trump’s tighter immigration policies add to inflation concerns. 

Fiscal concerns overblown: Long-term government bond yields have risen this year, notably in the UK, France and Japan, because of fiscal concerns. We see limited scope for large-scale fiscal easing in Japan, given resurgent wage-driven inflation, which makes the economic backdrop different from when former Prime Minister Abe implemented his reflationary policies (2012-2022). France’s yield premium over German bonds remains below last year’s highs and the ECB’s backstop should help prevent significant rise in yields. We see this as an opportunity to lock in yields in 5-7-year bonds, which are less exposed to long-term fiscal concerns. US inflation-protected bonds remain attractive hedges if long-term inflation risks rise.

Road bump in gold’s record rally: History, especially from the inflationary 1970s, shows gold has outperformed other assets during periods of fiscal dominance. However, after a record-setting rally, investor positioning in gold appears extremely one-sided (bullish), raising the risk of a near-term pullback. We remain bullish on gold over the longer-term amid rising structural demand from global central banks and investors. Medium-term investors who are under-allocated to gold should consider using any pullback below USD 3,900 to add exposure.

US earnings likely to deliver Against the above uncertainties, we expect another strong US earnings season, driven by the AI-driven tech sector, to ultimately offset near-term headwinds from stretched investor positioning and valuations. However, investors with excessively concentrated exposure in US equities may partially rotate into other markets, especially Asia ex-Japan, where earnings estimates are rising and valuations are attractive. To protect excessively concentrated exposures, investors can also use put options as short-term partial hedges.

—  Rajat Bhattacharya

The weekly macro balance sheet

Our weekly net assessment: On balance, we see the past week’s data and policy as neutral for risk assets in the near-term

(+) factors: Easing tensions between Israel and Hamas, dovish Fed
(-) factors: US government shutdown, slowing US services activity, escalating trade tensions


US service sector business confidence fell more than expected as new orders slowed sharply, but prices paid rose unexpectedly

US ISM services PMI; ISM services new orders, employment and prices-paid sub-indices


Euro area’s investor sentiment improved moderately in October, but remained negative. Retail sales rose 1% y/y, missing estimates


China saw a record 2.4 billion cross-regional passenger trips during the Golden Week holiday

China’s cross-regional passenger trips

Source: Bloomberg, Standard Chartered

Top client questions

What are we expecting from the US Q3 earnings season? Do you expect curbs on the export of semiconductor equipment to China to impact the US technology sector?

Our view: Robust earnings growth should drive US equities higher over the next 6-12 months, including our preferred sectors of technology, communication services and healthcare. Further export restrictions would likely lead to volatility in the US technology sector, but growth should remain intact, driven by AI investments in the US.

Rationale: Major US banks will kick off the Q3 earnings season on 14-October. US earnings growth is expected todecelerate from Q2 (13.8% y/y growth) to Q3 (8.8%) and further in Q4 (7.6%), according to LSEG I/B/E/S estimates. Q3 growth is likely to be led by the technology and real estate sectors, while energy and utilities are the laggards. The expected growth in 2025 earnings is at 10.8%, revised up from 8.5% at mid-year. 2026 earnings growth estimates have been stable since the middle of this year, at 14%.

Our three overweight sectors — communication services (21.3%), technology (20.9%) and healthcare (12.8%) — are likely to lead 2025 earnings growth. AI investments boost the growth in technology and the use of AI tools and strength in digital advertising/online entertainment helps the communication services sector. Regulatory uncertainties have been hurting the Healthcare sector this year, but valuations are attractive, and tariff uncertainty is easing. Heading into 2026, technology should continue to lead in earnings growth (21.9%) along with the cyclical materials and industrials sectors.

In recent days, a US House committee has called on the Trump administration to expand export bans on the sale of semiconductor equipment to China. In addition, section 232 semiconductor tariffs remain under investigation. These factors add uncertainty on sales to China, which account for 18% of the US semiconductor industry’s revenue and 13% of the broader US technology sector’s revenue.

However, analysts are already conservative in their China sales’ estimates, following companies’ forward guidance. It already excluded the sale of moderately advanced semiconductors to China. Meanwhile, there has been rapid growth in AI infrastructure spending plans in the US, which boost earnings estimates. 2025 earnings growth in the technology sector has been revised up, to 20.9% from 16.8% at mid-year, with the growth forecast in 2026 also revised up to 21.9% from 18.7%. Further curbs to China may cause headwind, but US AI investments underpin the bulk of the growth.

— Fook Hien Yap, Senior Investment Strategist


We expect our preferred sectors to lead the US 2025 earnings growth: communication services, technology and healthcare

2025 consensus earnings growth by sector as of 3-Oct and 1-Jul


The US technology sector is showing the strongest 2026 earnings growth projection, due to significant AI investments

2026 consensus earnings growth by sector as of 3-Oct and 1-Jul

Source: LSEG I/B/E/S, Standard Chartered

Top client questions (cont’d)

How does the resignation of France’s PM affect the outlook of European equities and EUR?

Our view: Equities – Underweight Europe ex-UK equities. Rotate into regions with higher growth opportunities, e.g. Asia ex-Japan and the US, for investors who are underallocated.

FX – EUR/USD to stay rangebound between 1.1420-1.1690.

Rationale: With the appointment of a new Prime Minister by this weekend, there is now less likelihood of a dissolution of the National Assembly in the near-term. However, while there could be a short-term technical rebound in French risky assets, the long-term story is still murky. There are still structural issues in the French economy, such as soaring debt and fiscal deficits. It remains in doubt whether the 2026 budget, including a much-needed fiscal consolidation, can be passed in time, due to the political deadlock. The expected rise in risk premium will likely undermine investor confidence and continue to limit equity returns. The risk of a potential corporate tax hike, to narrow the fiscal gap in France, is a lingering factor to French, and ultimately, to Europe ex-UK, equities.

Political uncertainty in France has had limited impact on FX market so far, but the EUR/USD one-month risk reversals have narrowed sharply, which means investors have turned more defensive. On the other hand, firm German yields, recent comments from ECB President Lagarde on strengthening the foundation of the EUR and an apparent end to the ECB’s easing cycle are supporting the EUR.

—  Michelle Kam, CFA, Investment Strategist
Iris Yuen, Investment Strategist


Earnings projections for Europe ex-UK equities are below Asia ex-Japan and the US

Consensus 12m forward earnings growth estimates for MSCI equity indices


We see EUR/USD largely rangebound

EUR/USD and technical levels

Source: Bloomberg, Standard Chartered

Top client questions (cont’d)

Should we continue adding to gold at current levels? What are your views on commodity currencies, including the AUD?

Our View: Gold is poised for a pullback in the near-term. Investors should trim excessive exposure. AUD/USD may edge higher towards resistance at 0.67.

Rationale: Gold has surged 3% thus far in October, bringing year-to-date gains to over 50%. Prices are rapidly approaching our (already upwardly revised) 12-month price target of USD 4,100. Investor positioning has become stretched, while our investor diversity indicator has reached levels that historically signalled a high probability of a pullback.

We remain overweight gold, with a 7% allocation in our Balanced Foundation portfolio. However, given the rapid rise in prices, investors who are over-allocated, either actively or passively due to strong returns, may consider taking partial profits and rebalancing their portfolios.

For investors who are under-allocated, we would wait for a pullback towards USD 3,850 before gradually building positions, as we continue to see positive long-term structural drivers for gold, including persistent central bank demand. 

Strong gold prices bode well for the AUD.  A softer broad USD outlook and a relatively more hawkish RBA versus the Fed, is supporting the AUD/USD. Besides gold, iron ore remains Australia’s largest export earner. Its rebound from the June lows has also helped stabilise the broader Australia economy. Higher commodity prices will improve the terms of trade, lending tailwind to AUD/USD.

—  Tay Qi Xiu, Portfolio Strategist
Iris Yuen, Investment Strategist


AUD/USD and technical levels

Top client questions (cont’d)

G3 government bonds have experienced yield curve steepening over the past week. What were the drivers and what is your near term outlook?

Our view: Add medium maturity USD bond if US 10-year government bond yield rises above 4.25%. Add French bank bonds on dips.

Rationale: G3 government bond yields (US, Europe, and Japan) rose over the past week amid political changes in Japan and France. In Japan, Sanae Takaichi won the LDP leadership election. She is pro-stimulus, and that may delay Bank of Japan’s rate hikes. There are concerns that this may lead to increased Japanese government bond (JGB) issuance to cover deficits. In France, Prime Minister Lecornu resigned after failing to form a cabinet and secure budget agreements in a fragmented National Assembly. The shift in sentiment also impacted US government bonds, particularly in October, which has historically been a weak-performing month, due to increased supply of long-duration bonds.

We expect the 10-year Japanese government bond yield to be capped at 1.7% in the near term, as the BoJ may control the yield curve if there were to be excessive rise in yields, and if Takaichi implements less drastic fiscal policies than what markets are expecting. For France, we believe the yield premium for holding French government bonds over German bonds will remain elevated, though it is still below the level seen when PM Barnier resigned last December. While fiscal consolidation in France is necessary, and the path to sustainability is challenging, we see this risk as localised and unlikely to trigger another European crisis.

Recent U.S. labour market data indicate a gradual softening in demand, supporting further Fed cuts and limiting the scope of sustained yield increases. We expect the US 10-year government bond yield to trade within a 4.0%–4.25% range. We recommend adding long-dated USD bonds if the 10-year yield rises above 4.25%. We continue to favour the 5- to 7-year maturity bucket, which offers a good balance between yields versus fiscal and inflation considerations. Investors can consider adding French bank bonds on dips, as we see potential for recovery amid these challenges.

—  Ray Heung, Senior Investment Strategist
Anthony Naab, CFA, Investment Strategist


US, France and Japan 10year government bond yield


US government bond index average monthly returns (2000-2024)

Source: Bloomberg, Standard Chartered

Market performance summary*


Our 12-month asset class views at a glance

Economic and market calendar

The S&P500 has next interim resistance at 6,839

Technical indicators for key markets as of 8 October close


Investor diversity in gold fell below threshold

Our proprietary market diversity indicators as of 8 Oct close

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Taiwan: SC Group Entity or Standard Chartered Bank (Taiwan) Limited (“SCB (Taiwan)”) may be involved in the financial instruments contained herein or other related financial instruments. The author of this document may have discussed the information contained herein with other employees or agents of SC or SCB (Taiwan). The author and the above-mentioned employees of SC or SCB (Taiwan) may have taken related actions in respect of the information involved (including communication with customers of SC or SCB (Taiwan) as to the information contained herein). The opinions contained in this document may change, or differ from the opinions of employees of SC or SCB (Taiwan). SC and SCB (Taiwan) will not provide any notice of any changes to or differences between the above-mentioned opinions. This document may cover companies with which SC or SCB (Taiwan) seeks to do business at times and issuers of financial instruments. Therefore, investors should understand that the information contained herein may serve as specific purposes as a result of conflict of interests of SC or SCB (Taiwan). SC, SCB (Taiwan), the employees (including those who have discussions with the author) or customers of SC or SCB (Taiwan) may have an interest in the products, related financial instruments or related derivative financial products contained herein; invest in those products at various prices and on different market conditions; have different or conflicting interests in those products. The potential impacts include market makers’ related activities, such as dealing, investment, acting as agents, or performing financial or consulting services in relation to any of the products referred to in this document. UAE: DIFC – Standard Chartered Bank is incorporated in England with limited liability by Royal Charter 1853 Reference Number ZC18.The Principal Office of the Company is situated in England at 1 Basinghall Avenue, London, EC2V 5DD. Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Standard Chartered Bank, Dubai International Financial Centre having its offices at Dubai International Financial Centre, Building 1, Gate Precinct, P.O. Box 999, Dubai, UAE is a branch of Standard Chartered Bank and is regulated by the Dubai Financial Services Authority (“DFSA”). This document is intended for use only by Professional Clients and is not directed at Retail Clients as defined by the DFSA Rulebook. In the DIFC we are authorised to provide financial services only to clients who qualify as Professional Clients and Market Counterparties and not to Retail Clients. As a Professional Client you will not be given the higher retail client protection and compensation rights and if you use your right to be classified as a Retail Client we will be unable to provide financial services and products to you as we do not hold the required license to undertake such activities. For Islamic transactions, we are acting under the supervision of our Shariah Supervisory Committee. Relevant information on our Shariah Supervisory Committee is currently available on the Standard Chartered Bank website in the Islamic banking section. For residents of the UAE – Standard Chartered UAE (“SC UAE”) is licensed by the Central Bank of the U.A.E. SC UAE is licensed by Securities and Commodities Authority to practice Promotion Activity. SC UAE does not provide financial analysis or consultation services in or into the UAE within the meaning of UAE Securities and Commodities Authority Decision No. 48/r of 2008 concerning financial consultation and financial analysis. Uganda: Our Investment products and services are distributed by Standard Chartered Bank Uganda Limited, which is licensed by the Capital Markets Authority as an investment adviser. United Kingdom: In the UK, Standard Chartered Bank is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. This communication has been approved by Standard Chartered Bank for the purposes of Section 21 (2) (b) of the United Kingdom’s Financial Services and Markets Act 2000 (“FSMA”) as amended in 2010 and 2012 only. Standard Chartered Bank (trading as Standard Chartered Private Bank) is also an authorised financial services provider (license number 45747) in terms of the South African Financial Advisory and Intermediary Services Act, 2002. The Materials have not been prepared in accordance with UK legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Vietnam: This document is being distributed in Vietnam by, and is attributable to, Standard Chartered Bank (Vietnam) Limited which is mainly regulated by State Bank of Vietnam (SBV). Recipients in Vietnam should contact Standard Chartered Bank (Vietnam) Limited for any queries regarding any content of this document. Zambia: This document is distributed by Standard Chartered Bank Zambia Plc, a company incorporated in Zambia and registered as a commercial bank and licensed by the Bank of Zambia under the Banking and Financial Services Act Chapter 387 of the Laws of Zambia.