Market Report.
🇺🇸 President Trump said the U.S. and China are poised to “come away with” a trade deal ahead of his expected meeting with Chinese leader Xi Jinping. He also said he could sign a final deal on TikTok as early as Thursday. U.S. Treasury Secretary Bessent said Trump’s threat of 100% tariffs on Chinese goods is “effectively off the table” and that a “substantial framework” was produced that could ease concerns for U.S. soybean farmers.
🤝 During his Asia trip, Trump secured trade and mineral agreements with several Southeast Asian countries, including Malaysia, Cambodia, Thailand, and Vietnam. These deals aim to remove trade barriers, provide preferential market access, and increase U.S. export.
📜 The agreements focused on “cooperation rather than hard commitments,” with many details still to be worked out. The U.S. can impose tariffs or terminate the deals if it considers the countries in violation.
🇨🇳 The “new reality” for US-China ties appears to be one of “frequent ruptures and short-term fixes.” From Beijing’s perspective, fewer external uncertainties will allow policymakers to focus on supporting the domestic economy and enhancing China’s technological self-sufficiency.
🇨🇦 President Trump said he does not anticipate meeting with Canadian Prime Minister Mark Carney “for a while” as he continues to be upset over a TV ad by the province of Ontario that criticized his tariff regime. The dispute stems from an ad by the Ontario government that featured excerpts of former President Reagan criticizing tariffs. Trump had threatened to increase tariffs on Canada by 10% over the ad.
📺 While Ontario Premier Doug Ford said he would stop airing the ad after the weekend, Trump expressed frustration that it was not immediately pulled and said he does not know when the additional tariff will kick in.
🔍 Canada currently faces a 35% base tariff from the U.S., with exemptions for products under the U.S.-Mexico-Canada trade agreement. It is unclear if the potential 10% increase would apply to the base rate or the exempted goods.
🤨 Trump dismissed the fact that the ad was funded by the Ontario government rather than the federal Canadian government, saying “the prime minister knew – everybody knew.”
🇧🇷 Brazilian President Luiz Inacio Lula da Silva said he had a “surprisingly good” meeting with US President Donald Trump, and predicted a “definitive solution” to their bilateral disputes within days. Lula said negotiations will take place in Washington next week to resolve the issues. He called the US sanctions taken against Brazil over complaints about Brazilian judicial authorities “unacceptable.”
📈 Brazil has faced 50% import duties on key exports for months as part of Trump’s efforts to stop the Supreme Court trial of his ally Jair Bolsonaro, which strained relations between the US and Brazil. Lula said Bolsonaro is now in the past of Brazilian politics, and the tariffs were based on “wrong information.” He stressed that Brazil typically runs an annual trade deficit with the US.
🌱 Lula invited Trump to come to Brazil for the COP30 climate talks, indicating a desire to improve the bilateral relationship. The negotiations in Washington next week will be crucial in determining the path forward.
📉 Europe will undergo a rigorous economic health-check this week, with data releases that will help gauge the impact of US tariffs on growth and inflation as policymakers convene to set interest rates. The main event will be the initial reading of Q3 GDP for the euro zone on Thursday, just before the European Central Bank reveals its monetary policy decision.
🇪🇺 The euro zone is expected to have achieved minimal growth of 0.1% in Q3, with national reports from major economies such as Germany, France, Italy, and Spain offering additional insights. Inflation for October is anticipated to dip slightly to 2.1% from 2.2%, and the ECB’s Bank Lending Survey will be closely monitored for signs of economic resilience.
🇩🇪 In Germany, where Q2 output shrank by 0.3%, risks remain due to weak domestic demand, external headwinds, and low capacity utilization, all of which could hinder recovery efforts. The ECB is broadly expected to maintain interest rates at 2% for the next two years. However, skepticism persists regarding the strength of the recovery, particularly in France, where political instability continues to weigh on economic confidence.
📊 According to a Reuters poll, a majority of economists expect the Bank of Japan (BOJ) to raise its key interest rate in either October or December, with nearly 96% expecting a rate hike of at least 25 basis points by the end of March. 60% of the economists polled expect the BOJ to raise short-term interest rates to 0.75% from 0.50% this quarter, with January 2024 being the top choice for the timing of the next rate hike.
💴 While the new Prime Minister, Sanae Takaichi, is seen as a fiscal dove who wants to reassert the government’s influence over the central bank, two-thirds of respondents said this would not delay the BOJ’s push for tighter monetary conditions. There are concerns about the impact of Takaichi’s expansionary fiscal policies on Japan’s fiscal health.
📉 The poll suggests that market pressures, such as a rise in long-term yields, could act as a restraint on the government’s fiscal expansion plans.
⚾ U.S. President Donald Trump is visiting Tokyo, with the focus on more lighthearted topics like baseball, golf, and Nobel Peace Prizes, rather than trade tensions. This has allowed Asian markets to consolidate most of the gains made on Monday, with indexes in Japan, Taiwan, and South Korea near record highs. China’s Shanghai index also pushed past 4,000 for the first time since 2015.
🇰🇷 South Korea’s economy grew by 1.2% in the third quarter, the fastest pace in a year-and-a-half, according to central bank estimates. This was driven by strong exports and solid private consumption, as government stimulus boosted spending.
📉 However, the recovery is fragile and dependent on policy support, as U.S. tariff policies could lead to slower exports and undermine the economy’s current momentum. Growth is expected to slow to around 0.5% in the fourth quarter. Exports expanded 1.5% quarter-on-quarter, slower than the 4.5% growth in the second quarter. South Korea’s cars and auto parts could face higher U.S. tariffs if Seoul and Washington fail to sign a revised trade deal.
📉 The Bank of Korea sees the economy expanding 0.9% this year, the weakest growth since a 0.7% decline in 2020 due to the pandemic. On an annual basis, the economy grew 1.7%, up from 0.6% in the second quarter.
🎃 Some relief for high UK inflation: British retailers cut their prices in October, led by the biggest drop for food in almost five years, offering some relief to households before Halloween as well as the Bank of England and the government. Food prices saw a 0.4% monthly drop, the biggest such fall since December 2020, helping to cool annual food price inflation to 3.7% from 4.2% in September.
👀 The Bank of England is closely watching food prices as it believes they have a big role in shaping public inflation expectations. This data could provide some relief, as headline inflation remains high at 3.8%.
Geopolitics.
🕵️♂️ According to several reputable sources, Venezuelan government has claimed it captured a mercenary group allegedly backed by the CIA that was planning a false flag operation in waters near Trinidad and Tobago.
Market View.
📈 We remain at all-time highs as Wall Street continues its euphoria, assuming that everything is going well and that the Fed will cut rates this week, despite lacking September employment data. Mini S&P 500 futures are soaring, trading above 6,900 points. Nasdaq 100 futures are on the verge of reaching 26,000 points. What could possibly go wrong?
📉 The DXY dollar index has declined slightly, falling to its current level of 98.70 points. EUR/USD has recovered to 1.1650.
🇪🇺 European indices are also optimistic, though much more cautious. DAX 40 futures have failed to surpass 24,400 and have retreated to 24,355 points at the moment. EuroStoxx 50 futures, however, have managed to rise above 5,700 points.
🛢️ Crude oil is retreating once again, with Brent crude falling below $64 per barrel.
🥇 Gold futures have dropped below $4,000 per ounce and are currently trading at $3,950 per ounce.
💰 Bitcoin surpassed $116,000 during yesterday’s session but has since retreated to its current level of $114,200.
