Markets Today: Euro Area Inflation Ticks Up, Gold Eyes $3900/oz, DAX Breaches Confluence Level & US Government Shutdown in Focus

[Ben Graham]

Asia Market Wrap - Nikkei at Three- Week Lows

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Japanese stocks experienced a widespread sell-off on Wednesday as investors chose to cash in profits following the market's recent strong rally, marking the beginning of the second half of the fiscal year.

The main Nikkei index fell by 0.85%, closing at its lowest point since September 11, and marking its fourth straight session of losses. The broader Topix index also lost 1.37%. This decline followed a spectacular September for the Nikkei, which gained 5.2% and hit a record high, largely driven by chip-making equipment maker Tokyo Electron which soared 27.6% last month.

However, Tokyo Electron's shares fell 2.09% on the day, and tech investor SoftBank Group lost 2.38%, becoming the biggest downward drags on the Nikkei. Almost all sectors on the Tokyo Stock Exchange declined, with bank stocks performing the worst; major lenders like Mitsubishi UFJ Financial Group and Mizuho Financial Group saw significant losses.

This market caution came as the US government began to shut down after Congressional Democrats and President Donald Trump failed to agree on health-care spending.

President Trump escalated the situation by suggesting he might permanently fire "a lot" of federal workers.

Investor attention is now completely focused on the shutdown, which creates uncertainty for the world's largest economy and threatens to delay key economic reports the Federal Reserve needs to determine its path for interest rate cuts. This uncertainty arises despite the S&P 500 recently rebounding from its April lows to record its strongest September in over 15 years, a rally fueled by excitement over artificial intelligence and the expectation of lower interest rates.

Euro Area Inflation Ticks Higher

Euro area inflation, which measures consumer price increases, rose slightly to 2.2% in September 2025, according to preliminary data.

This figure is a small increase from the 2.0% seen in the previous three months and is now just above the European Central Bank's 2.0% target. The main reason for this increase was a smaller drop in energy costs, which fell by only 0.4% compared to a much larger 2.0% drop in August. Inflation for services also ticked up slightly. In contrast, prices for food, alcohol, and tobacco rose at a slower rate, mostly due to weaker price increases for unprocessed food. The prices for non-energy industrial goods remained unchanged.

However, the measure that the central bank often watches, core inflation, which excludes volatile items like energy and food remained stable at 2.3%, holding at its lowest level since January 2022.

European Session - European Stocks Rise

European stock markets advanced on Wednesday, primarily led by a jump in healthcare stocks. The optimism in the healthcare sector was sparked by a deal between the US government and Pfizer, which helped reduce uncertainty for drugmakers.

This boost occurred despite ongoing concerns that a potential US government shutdown could delay the release of the key monthly jobs data.

The main pan-European index, the STOXX 600, gained 0.3% and is heading for its fourth straight day of gains. While the overall mood was positive, performance across national markets was mixed: Spain's index fell 0.4%, but the UK's FTSE 100 climbed 0.7% to hit an all-time high.

Healthcare stocks surged 3.1%, marking what could be their largest single-day gain in over a year. The catalyst was the news that Pfizer agreed to lower the price of its prescription drugs in the US Medicaid program in exchange for relief from US tariffs.

Several other pharmaceutical stocks saw significant gains, including Ambu, Sartorius, Merck, Roche, and AstraZeneca. Additionally, Novartis gained 2.5% after the US FDA approved its new oral treatment for a chronic inflammatory skin disease.

On the downside, the technology sector dipped 0.6%, and real estate lost 0.8%. Among individual companies, the UK's food ingredients maker Tate & Lyle dropped 9.4% after warning that its annual profit and revenue would decline.

Conversely, the Dutch engineering firm Arcadis climbed 8.6% after announcing a new share buyback program.

On the FX front, The US dollar dropped to its lowest value in a week against other major currencies on Wednesday, with the dollar index slipping 0.2%.

This market movement showed signs of investors seeking safety, which boosted low-interest currencies traditionally seen as safe havens, such as the Japanese yen and the Swiss franc.

The dollar fell by 0.5% against the yen, reaching its weakest level in about two weeks, and also lost around 0.2% against the Swiss franc.

At the same time, US government bonds (Treasuries) and gold maintained their strong positions.

Currency Power Balance

Source: OANDA Labs

Oil prices stabilized on Wednesday after two consecutive days of declines. Investors were assessing two opposing forces: the plan by major oil producers (OPEC+) to increase output next month, which suggests more supply, versus recent economic data from the US and Asia that showed signs of weakening demand.

Despite being stable now, both major oil contracts, Brent crude futures and U.S. West Texas Intermediate (WTI) crude had fallen by 1% earlier in the volatile trading session.

On Monday, both had dropped more than 3% in their steepest daily decline since August 1, followed by a further 1.5% drop on Tuesday.

Brent crude futures were last down 4 cents at $65.99 a barrel, and WTI crude fell 5 cents to $62.32 a barrel.

Gold prices surged to a new record high on Wednesday, primarily driven by investor demand for safe-haven assets following the start of the U.S. government shutdown.

This political uncertainty was compounded by the release of weak labor market data, which increased expectations that the Federal Reserve will be forced to cut interest rates to support the economy.

As a result, spot gold trades at $3,882/oz, after peaking earlier in the session at an all-time high of $3,895.32/oz.

Economic Calendar and Final Thoughts

Looking at the economic calendar, the European session has brought a host of data releases thus far.

The US session will bring US PMI and employment data which may be given more attention now that the NFP release may be delayed due to the US Government shutdown.

Continuing with the trend this week, we have a host of central bank policymakers speaking which could stoke volatility as they discuss the outlook for monetary policy moving forward.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the Day - DAX Index

From a technical standpoint, the DAX index is finally eyeing a break above the key confluence level at 24000.

The psychological level also hosts both the 50 and 100-day MAs with the DAX trading above both at present.

Beyond that the DAX continues to trade in the channel which has been since the beginning of August with the top end of the channel around the 24200 mark.

A move to the top of the channel will reignite the question of whether a break or bounce will occur and present further opportunities for market participants.

Resistance on the upside may be found at 24200, 24400 and the recent highs at 24654.

Looking at the downside, immediate support is now provided by both the 50 and 100-day MAs before the 20 day MA resting at 23705 comes into focus.

DAX Index Daily Chart, October 1. 2025

Source: TradingView.com (click to enlarge)

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