Wall Street major averages slipped on Tuesday as increasing geopolitical tensions spooked traders. 

At the time of writing, the Dow Jones Industrial Average dipped 0.9%, while the S&P 500 index fell 0.5.

The Nasdaq Composite lost 0.2% on Tuesday. 

Gold futures rose on Tuesday, driven by increased safe-haven inflows due to escalating tensions between Russia and Ukraine. 

Late on Monday, Russian President Vladimir Putin warned that the threshold for using nuclear weapons had reduced. 

The statement comes amid reports, which claimed that the US had allowed Ukraine to use US-made weapons to launch strikes deep into Russia.  

Tensions were on the boil after further reports claimed that Ukraine had attacked the Russian region with US-made missiles, according to Russia’s military. 

The New York Times confirmed the attack, citing US and Ukrainian officials. The attack was on an ammunition warehouse, according to the report. 

Gaurav Mallik, chief investment officer at Pallas Capital Advisors told CNBC:

Rising geopolitical tensions has been and continues to be a risk for markets. 

“The combination of Russia ratcheting up its war rhetoric and uncertainty about how the incoming U.S. presidential administration will respond is a recipe for stock market volatility.”

Walmart hits fresh intraday record high

Shares of Walmart hit a fresh all-time high on Tuesday after the company posted positive earnings results. 

The positive third-quarter earnings results had topped analysts’ expectations. The company also raised its outlook. 

At the time of writing, the stock was up nearly 3%. The stock was also on course for its best day since August 15, when shares had jumped 6.6%.

The third-quarter adjusted earnings per share came in at $0.58, beating consensus of $0.53. 

Store sales in the US for the company expanded 5.3%, beating expectations of an increase of 3.73%. 

“We had a strong quarter, continuing our momentum,” Reuters quoted Doug McMillon, President and CEO of Walmart in a report. 

In the US, in-store volumes grew, pickup from store grew faster, and delivery from store grew even faster than that. Our teams are executing and delighting our customers and members with the value and convenience they expect from Walmart.

Super Micro Computers soars

Shares of Super Micro Computers soared more than 28% after the company announced its newest auditor. 

The company, a key player in storage and server technology, confirmed late on Monday that it had appointed BDO USA as its new independent auditor. 

It also submitted a plan to Nasdaq, requesting more time to file its overdue financial reports. 

Last month, Ernst & Young’s sudden resignation as the auditor of the company sparked doubts about the business. 

However, Super Micro Computers has reaffirmed that it was on track to meet Nasdaq’s financial standards. 

Meanwhile, NVIDIA Corporation’s stock rose more than 2% as the company is expected to post its third-quarter results on Wednesday. 

Investors will be closely monitoring the demand for the AI company’s Blackwell chip. 

Housing starts, building permits decline

According to the US Census Bureau, new housing permits missed expectations due to high mortgage rates and declining activity. 

New construction last month totaled a seasonally adjusted annual growth rate of 1.31 million units, 3.1% lower than in September.

Dow Jones had estimated new constructions at 1.34 million. The total was also 4% below October 2023. 

On building permits, the total of 1.42 million represented a 0.6% monthly decline and missed the forecast for 1.43 million. Permits declined 7.7% from a year ago.

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For years, China’s economy was focused on short-term growth, often at the expense of addressing deeper structural flaws. 

From its struggling property sector to a reliance on state-owned enterprises, the cracks in the foundation are becoming harder to ignore. 

Now, with global pressures mounting and growth targets harder to meet, the country faces a defining moment.

Will Beijing continue its cycle of quick fixes, or will it confront the systemic issues that threaten its economic future?

Weak industrial output, but strong consumer

Recent data from the National Bureau of Statistics reveals a slowdown in industrial output, which grew 5.3% in October, slightly below the 5.4% recorded in September. 

The pace also missed market expectations of 5.6%.

This signals weakness in manufacturing, which has long been a cornerstone of China’s economic model.

On the consumer side, there is some relief. Retail sales grew 4.8% in October, marking the fastest increase since February.

The boost was driven by the Singles’ Day shopping festival, where e-commerce sales soared by 26.6% to 1.44 trillion yuan.

The recovery in consumption reflects Beijing’s stimulus measures, but the question remains: Is it sustainable without deeper changes in income and employment?

A housing crisis with no easy fix

China’s property sector, once a key growth driver, continues to struggle.

Year-to-date property sales fell 15.8% through October, a slight improvement from September’s 17.1% drop. 

However, property investment is still declining, and the sector’s troubles are spilling over into related industries, from construction to local government finance.

Local governments, heavily reliant on land sales for revenue, are drowning in debt.

These financial strains limit their ability to invest in infrastructure and public services, compounding the broader economic slowdown. 

Beijing’s recent tax incentives on home and land transactions may stabilize demand, but they are unlikely to reverse the sector’s long-term decline.

Without decisive action, the property crisis risks becoming a deflationary drag on the entire economy.

Trump’s tariffs return

The external environment is also growing more hostile. Donald Trump’s re-election has revived the specter of a full-blown trade war. 

Trump has proposed tariffs of up to 60% on Chinese imports, which analysts estimate could slash China’s GDP growth by over 2.5 percentage points.

For a country targeting 5% growth, this could be devastating.

Beijing is already bracing for impact. It has ramped up initiatives like the Belt and Road Initiative (BRI) and deepened ties with emerging markets.

For instance, China recently inaugurated a $3.5 billion megaport in Peru, aimed at strengthening trade links between Latin America and Asia. 

These moves indicate China’s intentions to diversify its trade relationships and reduce dependence on Western markets.

Exporters feel the squeeze

China’s export sector is under pressure from domestic policy changes as well.

The government recently cut tax rebates on a range of products, including aluminium, photovoltaics, and batteries.

Aluminium exporters, who shipped 4.62 million metric tons between January and September, face rising costs that could hurt competitiveness (Shanghai Metals Market).

Exporters of solar modules may pass higher costs onto overseas buyers, but the impact on demand is expected to be limited.

For niche sectors like used cooking oil (UCO), the rebate cuts have led to shipment delays as contracts are renegotiated.

These changes highlight Beijing’s focus on retaining high-value products domestically, even at the expense of short-term export volumes.

Are fundamental issues being ignored?

For over a decade, Xi Jinping’s government has been urged to reform the economy’s structural flaws.

High youth unemployment, a rapidly aging population, and the dominance of state-owned enterprises are long-standing problems.

Yet reforms have been piecemeal at best.

China’s economic model remains highly reliant on annual GDP targets, which encourage short-term stimulus over long-term sustainability. 

This year’s 5% target has driven policies aimed at propping up consumption and infrastructure investment, but these measures do little to address deeper inefficiencies. 

Critics argue that Xi’s government, despite its centralized power, has yet to deliver the bold reforms needed to modernize the economy.

Tech ambitions and geopolitical risks

China’s push to lead in technology, particularly in artificial intelligence (AI) and semiconductors, is central to its future growth. 

However, geopolitical tensions with the US are disrupting global supply chains.

South Korea, under American pressure, has halved its chip exports to China, while Vietnam is positioning itself as a competitor in semiconductor manufacturing.

China’s technological ambitions are both an opportunity and a vulnerability.

The country’s AI development depends on a steady supply of advanced chips, an area where US export controls are tightening.

These restrictions not only slow China’s progress but also expose the fragility of its tech sector’s reliance on global supply chains.

Growth or reform?

China is now facing a difficult dilemma: Continue prioritizing short-term growth or take the risks necessary for deep structural reforms?

Retail sales data offers a glimmer of hope, but it is not a substitute for addressing the systemic issues dragging down productivity and innovation.

The property crisis, local government debt, and an over-reliance on state enterprises are barriers to sustained growth.

Meanwhile, external threats like Trump’s tariffs and the US-China tech rivalry only adds urgency to the need for change. 

Despite Xi’s consolidated power, his leadership has not yet produced significant reform breakthroughs.

With global investors increasingly wary, Xi’s ability to implement audacious reforms could define his legacy and the country’s economic trajectory.

In fact, China has the tools to reshape its economy. What remains to be seen is whether it has the political will to use them.

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Japan’s trade balance remained in the red for the fourth consecutive month in October, with a deficit of 461 billion yen ($3 billion).

This continued shortfall highlights the challenges posed by a weak yen and elevated energy prices, which have significantly inflated import costs.

The Finance Ministry’s latest data revealed that while exports increased by 3.1% year-on-year, driven largely by semiconductor equipment shipments, imports rose by 0.4%, maintaining a negative trade balance.

These figures underscore Japan’s reliance on exports for economic growth and the mounting challenges of global economic headwinds.

Exports rise but fail to outpace imports

In October, Japan’s exports showed signs of recovery, growing by 3.1% compared to the same month last year.

This growth was primarily attributed to higher demand for semiconductor production equipment, signalling resilience in key technological sectors.

Exports to Asia, including major hubs like Singapore and Hong Kong, recorded an uptick, reflecting regional demand stability.

Exports to the US saw a slight decline, illustrating ongoing challenges in one of Japan’s largest trade markets.

Meanwhile, imports grew at a slower pace of 0.4%, driven by the soaring cost of energy and raw materials exacerbated by the yen’s weakness.

Rising energy prices have disproportionately impacted Japan’s economy, which heavily depends on energy imports.

Weak yen and global pressures weigh on trade

The yen’s depreciation against the US dollar has compounded Japan’s trade difficulties.

The dollar recently traded at around 155 yen, a sharp decline from the 140-yen range a year ago.

While a weaker yen traditionally boosts export competitiveness, the benefits have been overshadowed by the higher cost of imports, especially energy and raw materials.

Inflationary pressures and rising global energy prices have further strained Japan’s trade position.

Import costs have surged, while slowing global demand, particularly in advanced economies, has dampened export growth.

Temporary disruptions, such as a recent typhoon and auto production setbacks, have also hindered export performance.

Global uncertainties on Japan’s trade

The future of Japan’s trade faces added uncertainties due to global economic shifts.

The reelection of Donald Trump as US president has raised concerns about potential changes in US-Japan trade relations, including the risk of higher tariffs.

Such measures could significantly impact Japan’s export-dependent economy, particularly its automotive and technology sectors.

Prime Minister Shigeru Ishiba, who recently attended the G20 summit in Brazil, has been proactive in strengthening Japan’s economic and trade ties with other regions, including Europe, South America, and Asia.

The looming threat of protectionist policies in the US adds a layer of complexity to Japan’s trade strategy.

Uneven regional performance

By region, Japan’s export performance has been uneven.

Shipments to Asian countries saw modest growth, with Singapore and Hong Kong driving demand for Japanese goods.

However, exports to the US experienced a slight decline, reflecting the volatility in bilateral trade dynamics and shifting economic priorities under the new US administration.

Imports, meanwhile, remained robust across all regions, with energy-related products accounting for a significant share.

The combination of a weaker yen and global energy market volatility has amplified Japan’s trade challenges, leaving policymakers with limited options to address the widening deficit.

How will Japan respond to these trade challenges?

Japan’s policymakers are navigating a complex economic landscape as they work to address the widening trade deficit.

Efforts to strengthen regional trade agreements and expand export markets have gained momentum under Ishiba’s administration.

Initiatives to promote renewable energy and reduce dependence on fossil fuel imports are critical to mitigating the impact of rising energy costs.

Domestically, the government is exploring measures to bolster production capacity and enhance supply chain resilience in critical sectors like automotive and semiconductors.

These steps aim to counterbalance the external pressures that have weighed heavily on Japan’s trade performance.

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The launch of options tied to BlackRock Inc.’s $44 billion iShares Bitcoin Trust has set the stage for potential record-breaking moments for Bitcoin.

On Tuesday, Nasdaq Inc. reported the trading of over 350,000 contracts on the first day, with data from Bloomberg indicating that approximately 80% of these were bullish bets.

Nine out of the 10 most-traded options were calls predicting price increases, Bloomberg said.

The highest trading volumes were observed in January $55 strike calls and December $65 strike calls — both of which were 25% higher than the ETF’s closing price on Monday.

Options trading enables investors to leverage Bitcoin’s notorious volatility by allowing them to purchase or sell an asset at a set price, depending on whether they expect the price to increase or decrease within a specific timeframe.

Bitcoin’s record peak and ETF influence

Bitcoin reached a new all-time high of $94,032, coinciding with the debut of these ETF options.

Investors are optimistic that US-based Bitcoin ETF options could lead to further inflows into the digital asset market.

This surge comes as a response to crypto advocate Donald Trump’s recent electoral victory.

Trump has committed to creating a regulatory environment favorable to digital assets and establishing a strategic Bitcoin reserve for the US.

However, questions remain about the timeline and feasibility of these ambitious plans.

ETF inflows and strong demand

The iShares Bitcoin Trust is currently the largest US spot-Bitcoin ETF and has witnessed significant demand.

Since its launch in January, the ETF has drawn a net inflow of approximately $29 billion.

Notably, around $5 billion of that total was accumulated after the November 5 election, signalling heightened confidence in the asset following political developments.

Caroline Mauron, co-founder of Orbit Markets, noted in the Bloomberg report that the trading volume is “a good start, demonstrating growing links between the crypto-native ecosystem and the traditional finance world.”

While the current trading volume may not directly drive Bitcoin’s price, positive news surrounding these developments has supported a bullish outlook.

Institutional interest and derivatives expansion

The global crypto derivatives market has traditionally been dominated by non-US platforms such as Binance and Deribit.

However, record-high open interest in Bitcoin futures hosted by Chicago-based CME Group Inc. indicates a growing appetite among US institutions for regulated crypto exposure.

Noelle Acheson, author of the Crypto Is Macro Now newsletter, emphasized that while the US crypto derivatives market remains smaller than other asset classes, its expansion could attract new investors and broaden the scope of investment strategies.

As of early Wednesday in London, Bitcoin was trading at $92,631.

The largest digital token has more than doubled in value this year, propelling the total crypto market past its peak from the pandemic era, according to CoinGecko data.

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