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Trading Day: Another whoosh in the 'everything rally'
Published by Global Banking and Finance Review
Posted on October 6, 2025
8 min readLast updated: January 21, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on October 6, 2025
8 min readLast updated: January 21, 2026
The 'everything rally' is driven by political shifts and AI, impacting global markets, stocks, and commodities. French and Japanese political changes play a significant role.
By Jamie McGeever
ORLANDO, Florida (Reuters) -TRADING DAY
Making sense of the forces driving global markets
By Jamie McGeever, Markets Columnist
Politics and AI powered huge moves across world markets on Monday, namely the collapse of the French government and surprise emergence of a likely new leader in Japan, and a multi-billion dollar chip-supply deal between AMD and OpenAI.
More on that below. In my column today, I ask the question: who needs U.S. economic data when you have the stock market? It may sound flippant, but the ties between Wall Street, household wealth and consumption have rarely been stronger.
If you have more time to read, here are a few articles I recommend to help you make sense of what happened in markets today.
1. From OpenAI to Meta, firms channel billions into AIinfrastructure as demand booms 2. France's political paralysis sparks fresh credit ratingwarnings 3. Takaichi win as Japan leader may delay, not derail, BOJrate hikes 4. Time for Germany's 'sugar rush' to hit: Mike Dolan 5. Top fund managers urge Bank of England to stop sellinggilts into rocky debt marketsToday's Key Market Moves
* STOCKS: Japan's Nikkei leaps 4.75% to new peak above48,000. Europe, UK, Nasdaq, Russell 2000, MSCI World hit newrecords too, fresh closing high for S&P 500. * SHARES/SECTORS: AMD shares +24%, Philadelphiasemiconductor index hits new high. Real estate the biggest U.S.sector decliner. * FX: Japan's yen sinks nearly 2% to 150/$, bitcoin atrecord high above $125,000. * BONDS: French yields spike, and Japanese yields surge tohistoric peaks - the 30-year yield a record 3.29%. U.S. Treasuryyields up, biggest rise in two weeks at the longer end. * COMMODITIES: Gold hits new record high of $3,970/oz,homes in on $4,000. Precious metal surge as much as 5%, oilrises almost 1% after OPEC+ ups production less than expected.Today's Talking Points:
* Is France really 'uninvestable'?
France's government collapsed on Monday within hours of being appointed after Prime Minister Sebastien Lecornu unexpectedly handed in his resignation to President Emmanuel Macron, making it the shortest-lived government in modern French history.
The French market reaction was predictable enough - stocks and bonds fell - but the big picture for the euro zone's second largest economy is more of a worry. French bonds are now increasingly seen as riskier than Italy's, and BCA Research has gone as far as to say French bonds are "uninvestable".
* Japan jolts global markets
Japan's ruling Liberal Democratic Party, which has governed Japan for almost all of the postwar era, has picked hardline conservative Sanae Takaichi as its leader, putting her on course to become the country's first female prime minister.
The most relevant aspect for markets is the likely effect of Takaichi's policy stance on government spending and the Bank of Japan - she is seen as a fiscal dove and has previously criticized the BOJ's rate hikes. The impact of Japanese policy and asset prices on global markets is always fascinating. Even more so now.
* AI's increasingly entangled web
Another day, another mega deal in the rarified air of Big Tech's artificial intelligence, and as night follows day, new record highs for the U.S. tech sector, semiconductor index and wider Nasdaq.
It's getting hard to keep up. As AJ Bell's Danni Hewson notes - Nvidia and Microsoft have stakes in OpenAI; OpenAI has a deal that could see it take a stake in AMD; Nvidia is taking a stake in Intel, which could become a manufacturing partner for AMD. "It all looks a bit odd, and it would be fascinating to hear what antitrust regulators have to say," Hewson writes.
Who needs US economic data when you have Wall Street?
The U.S. government shutdown is delaying key economic data releases, thickening the fog of uncertainty for policymakers and businesses, but they needn't worry. They still have access to one of the best economic indicators: the stock market.
That may sound flippant, but the connection between U.S. equity prices, consumer spending and economic growth is strengthening. By some measures, it has never been stronger.
This helps explain one of economists' big 'misses' this year: stubbornly resilient U.S. consumption. They seem to have underestimated the powerful, positive feedback loop of gravity-defying strength on Wall Street and consumer spending, the so-called wealth effect.
U.S. households have rarely been richer and have never had so much of their wealth in the stock market. The epic rally in equities is therefore making a lot of Americans feel a lot richer, increasing their propensity to spend. This is particularly true of the wealthiest households, who account for an outsized share of consumer spending.
The Federal Reserve's national financial account figures for the second quarter, the latest available, are revealing on this measure.
Total household net wealth rose by $7.09 trillion, the third-largest increase on record, with rising equity prices contributing an eye-popping $5.51 trillion to gains in household wealth during the period. This reflects the fact that equities' share of total household assets has risen to a record 31%, or more than 45% of households' financial assets, another record.
Considering the sheer size of these figures, it's reasonable to assume that the 'wealth effect' is one major reason why Americans are continuing to spend.
BIG SPENDERS
Economists are questioning the resilience of this consumption, however, as the U.S. labor market is showing signs of creaking, if not buckling. Job growth has essentially ground to a halt, and while this may partly be a consequence of reduced immigration, it still isn't something typically associated with robust household consumption.
Yet economists at TD Securities – who share concerns about the weakening U.S. job market – still expect consumer spending to accelerate in the third quarter to a 3.2% annualized rate, from 2.5% in the second, raising their GDP growth forecast to 2.8% from 2.2%.
What explains this seeming incongruity?
Namely, the rich, who largely thanks to roaring equity markets, keep getting richer.
Consumption may always be driven by the wealthy, but that's especially true today. The richest 10% of Americans account for around half of all consumer spending, which itself represents around 70% of all U.S. economic activity.
And the richest of all – the top 0.1% of households – saw their share of total household wealth rise to a record 13.9% in the second quarter, a period in which the S&P 500 rose 10.5% and the tech-dominated Nasdaq rose 17.5%.
These indices rose another 8% and 11%, respectively, in the third quarter, indicating that households felt even richer than they did in the second. Rich enough to keep on spending liberally?
The answer is likely "yes." Economists at Goldman Sachs reckon that positive wealth effects may be strong enough to support consumer spending growth over the next year, especially after it gets a boost from the Trump administration's tax cuts.
Goldman estimates quarterly annualized consumption growth was around 0.3 percentage points in the July-September period and will be around 0.2 percentage points over the next year.
That's assuming equity prices rise in line with nominal GDP growth. If equity markets keep booming, consumption could eclipse economists' expectations yet again.
REASONS TO BE CAUTIOUS
Of course, the 'wealth effect' is no guarantee of an uninterrupted consumption boom. While actual spending remains fairly healthy, consumer confidence is low, near the lowest on record, in fact, according to the University of Michigan's sentiment index. But that's the confidence of the average consumer, not that of the richest who keep seeing their stock portfolios appreciate.
And as TS Lombard's Dario Perkins points out, the savings rate should fall when net worth rises, as consumers take out cash and spend. That's not happening now - the savings rate is low at around 5%, but it has barely moved for the last few years.
Finally, stocks could stop defying gravity. Claims that we're reaching a market top have been growing lately. But as long as optimism about artificial intelligence remains elevated and U.S. tech companies continue recording strong earnings, that long-awaited correction will stay just out of reach.
That's good news for U.S. equity holders, and, on balance, the economy as a whole.
What could move markets tomorrow?
* Australia consumer confidence (October) * Japan household spending (August) * Germany industrial production (August) * ECB President Christine Lagarde speaks * Canada PMI (September) * U.S. Treasury auctions $58 billion of three-year notes * U.S. Federal Reserve officials scheduled to speak includeAtlanta Fed President Raphael Bostic, Minneapolis Fed PresidentNeel Kashkari, and Governors Michelle Bowman and Stephen MiranWant to receive Trading Day in your inbox every weekday morning? Sign up for my newsletter here.
Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
(By Jamie McGeever;)
The wealth effect refers to the increase in consumer spending that occurs when people perceive their wealth to have increased, often due to rising asset prices like stocks or real estate.
Consumer spending is the total amount of money spent by households on goods and services. It is a major driver of economic growth and reflects consumer confidence.
Equity represents ownership in a company, typically in the form of stocks. It reflects the value of an owner's stake after all liabilities have been deducted.
Gross Domestic Product (GDP) is the total monetary value of all goods and services produced within a country's borders in a specific time period, indicating economic performance.
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