- Wall Street indices saw mixed trading on Friday. The session opened with losses, primarily driven by fears surrounding US regional banks, which ultimately led to a decline in the Russell 2000 small-cap index.
- Concerns in the regional banking sector surfaced following the disclosure of loan fraud cases at Zions Bancorporation and Western Alliance.
- Subsequently, news that Donald Trump indicated he does not plan to impose vast tariffs on China, alongside ongoing trade negotiations and the expectation of a meeting with the Chinese President at the APEC summit at the end of October, helped market sentiment.
- The S&P 500 and Nasdaq ultimately gained just over 0.5% on Friday, while the Russell 2000 fell by 0.6%. Today, index futures are advancing, with the US500 up 0.34% and the US100 rising by 0.5%.
- In Europe, indices rose, buoyed by optimism surrounding the French budget and strong results from defensive companies. French Prime Minister Lecornu survived two confidence votes in the government.
- US Treasury yields dropped to 4.0%, near their lowest level since September last year, amidst growing expectations for interest rate cuts and lingering anxiety over US regional banks.
- EURUSD is rebounding after a sharp pull-back late Friday, with the pair trading above 1.1670.
- President Donald Trump held a phone call with Vladimir Putin to discuss the terms for ending the war in Ukraine, which triggered a drop in oil prices on expectations of increased supply. Concurrently, a meeting took place between Trump and Zelensky, where Trump reportedly again pressured the Ukrainian president to accept the loss of some territories in exchange for a ceasefire. Trump is still considering the provision of Tomahawk missiles to Ukraine.
- Crude oil has shown little reaction to the breach of a ceasefire in the Middle East, where Israel accused Hamas of attacks, leading to the bombing of the Gaza Strip. However, a renewed ceasefire came into effect this morning.
- The Bank of Japan signalled the possibility of further policy tightening should economic forecasts improve. The bank's meeting is scheduled for the end of this month. Simultaneously, coalition agreements are ending in Japan. The yen has stabilised in recent days, with the USDJPY pair currently in the 150-151 range.
- Economic data from China proved mixed. Retail sales for September grew by 3.0% year-on-year (y/y), slightly above the 2.9% forecast, but a deceleration from the prior 3.4% y/y pace. Industrial production rebounded more strongly to 6.5% y/y, exceeding the 5.0% forecast and the previous 5.2% y/y level.
- Investment data was weaker. Fixed-asset investment year-to-date (YTD) fell 0.5% y/y, below the expected 0.2% decline and the prior 0.5% y/y drop. Furthermore, property market investment (YTD) plunged 13.9% y/y, steeper than the anticipated 13.1% fall and the previous -12.9% y/y.
- China's GDP grew 4.8% y/y, meeting expectations but slowing from the previous 5.2% y/y. The quarterly increase was 1.1% quarter-on-quarter (q/q), stronger than the 0.8% forecast and matching the prior pace. The annual growth is the slowest this year, largely due to trade tensions and property market troubles.
- China's one-year and five-year lending rates remained unchanged at 3.0% and 3.5%, respectively.
- Property prices in China fell 0.41% month-on-month (m/m), the fastest decline in 11 months.
- Goldman Sachs projects that China will maintain a strict policy on rare earth metals until 2028, when some US-based investments are scheduled to begin mining operations.
- Inflation in New Zealand rose to 3.0% y/y in the third quarter, in line with expectations and up from 2.7% y/y. This figure is at the upper limit of the inflation target band, which may reduce the outlook for further interest rate cuts.
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Morning wrap (21.10.2025)
Daily summary: A green start to the new trading week 📈
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