The downturn came after U.S. Treasury Secretary Scott Bessent reaffirmed that President Trump remains committed to meeting Xi in South Korea for a two-day summit beginning October 31. However, Bessent’s remarks in the Financial Times—accusing Beijing of deliberately undermining the global economy—rekindled fears of a renewed escalation in trade hostilities.
Adding to market jitters, both nations began imposing port fees on ocean shipping firms handling a wide range of goods, from crude oil to consumer products, signaling heightened trade friction even as talks continue.
“Both Washington and Beijing are posturing before the November summit—escalate to de-escalate,” said Marc Velan, head of investments at Lucerne Asset Management in Singapore. “Neither side can afford an outright trade war heading into the U.S. midterms.”
European shares, which recently touched record highs, fell by 0.7%, mirroring weakness in Asian markets where technology stocks bore the brunt of the selloff. Futures on the S&P 500 and Nasdaq also dipped by 1%, suggesting a pause in Monday’s rebound when Wall Street rallied over 2% on Trump’s conciliatory tone regarding China.
Despite the pullback, some analysts argued that the correction was more technical than structural.
“Given recent rallies, this looks more like a pause for breath than a new wave of panic,” said Philip Shaw, chief economist at Investec. “The port charges appear to be tactical moves within the negotiation framework, not a breakdown in talks.”
Still, global risk indicators flashed red. Gold prices climbed 0.7% to $4,140 an ounce, near a fresh record high, while Bitcoin slumped 3.5% to $111,793, reflecting a retreat from riskier assets. The yen firmed slightly against the dollar, while U.S. Treasury yields eased as investors sought safety. The benchmark 10-year yield fell three basis points to 4.02%, and two-year yields dropped to 3.48%, marking their sharpest two-day slide since early August.
Danske Bank analysts noted that any further escalation could prompt the U.S. Federal Reserve to accelerate its expected cycle of rate cuts. Markets already anticipate the Fed will ease policy later this month amid a cooling labor market.
In commodities, Brent crude slipped 1.7% to $62.63 per barrel after OPEC revised its outlook, projecting that global oil supply and demand will remain largely balanced next year. Meanwhile, the euro edged down to $1.1554 following political turbulence in France, where President Emmanuel Macron survived fresh no-confidence motions.
As investors await the outcome of the U.S.–China summit, markets appear to be bracing for volatility—caught between hopes for de-escalation and the risk of a deeper trade rift with global repercussions.
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