Markets
Tensions between the US and China eased over the weekend after Friday evening’s dramatic turn of events in which US President Trump slapped China with an additional 100% tariff from November 1st over export restrictions for rare earth commodities. Vice-president JD Vance and Trump later indicated that negotiations are ongoing. US Treasury Secretary Bessent, the soothing market voice, indicated that to his knowledge, the Trump-Xi Jinping meeting is still on. Both leaders are scheduled to meet in person on the sidelines of the Asia-Pacific Economic Corporation (APEC) Summit which will be held in the South Korean city of Gyeongju on October 31-November 1st. It will be the first face-to-face meeting since 2019 and the first during Trump’s second term. Today’s more constructive tone helps erasing (part of) Friday evening’s panic move. We’d err on the side of caution though with US trading volumes thinned by Columbus Day holiday and as we don’t think the tit-for-that game between the US and China is already over. EUR/USD slides back from a start at 1.1613 to currently 1.1567. The trade-weighted dollar returns north of 99. European stock markets regain 0.5% after Friday’s beating but intraday sentiment is dwindling. Key US equity gauges opened over 1% stronger.
Today’s eco calendar was empty on both sides of the Atlantic. French politics captured some headlines as PM Lecornu and his cabinet rush to pass a budget, but risk being ambushed by several confidence votes. Snap elections are an accident waiting to happen, but not yet top of mind of investors. A flurry of central bankers take parole this week with hawkish Bank of England member Greene kicking off festivities. She strongly advocates keeping UK rates unchanged into 2026 as she’s worried over the slowing disinflation process, risks of second-round effects, elevated food prices and their impact on household inflation expectations and the fact that monetary policy isn’t actually restrictive in her view. BoE Greene’s hawkish views are known in the split BoE where governor Bailey probably holds the key vote in deciding either on the status quo or the rate cut at the November 6 policy meeting. He’s scheduled to speak tomorrow on the sidelines of the annual IMF and Worldbank meetings. Before he does, the UK Office for National Statistics publishes its latest labour market report. One of Bailey’s concerns is that situation on the UK labour market is worse than some numbers suggest. EUR/GBP followed EUR/USD south today, moving from levels just north of 0.87 to 0.8675 currently.
News & Views
Indian inflation slowed to 1.54 % Y/Y in September from 2.07% Y/Y in August. This marks the lowest Y/Y-reading since June 2017. According to the Ministry of Statistics, the decline in headline inflation and food inflation during the month of September is mainly attributed to favorable base effects and to a decline in food prices (-0.49% M/M). Food prices also were 2.28% lower compared to the same month last year. The RBI targets inflation to stay within a 2%-6% band. However other non-food components still showed higher price rises including 2.28% Y/Y for clothing and footwear, 3.98% for housing and 1.98% for fuel and light. Other miscellaneous (weight 26% of the index) still rose 5.35%. In this respect, Bloomberg calculates core inflation(excluding volatile food and energy prices) at 4.58% up from 4.21% in August. Even so, further impact of the consumer tax overhaul end September might slow inflation further and open the path for the Reserve Bank of India to cut the policy rate further in December (currently 5.5%) in order to support the economy as it suffers from US tariffs. The rupee is holding near all-time low levels against the dollar near USD/INR 88.67.
In its monthly oil market report, OPEC sees global oil demand growth for 2025 unchanged from previous month at around 1.3 mb/d, y-o-y. In 2026, global oil demand is forecast to grow by around 1.4 mb/d, y-o-y, also unchanged from last month’s assessment. OPEC indicated that the outlook for rising demand for oil comes as the global economy maintained its stable economic growth trajectory, supported by the consistent and strong momentum observed in 1H25. OPEC expects production of countries not participating in OPEC to grow by 0.8mb/day and to come in at 0.6mb/d next year, with Brazil, Canada, the US and Argentina as the main drivers. OPEC says that crude oil production by countries participating in the DoC increased by 630 tb/d in September, m-o-m, to average about 43.05 mb/d. Demand for 2026 Opec+ production is seen rising from 42.5mb/d to 43.1mb/d next year. Brent oil today rebounds marginally after the risk-off decline (trade tensions) on Friday (currently $63.2/b).
