Hopes Up that China-U.S. Truce on Trade Will Extend Beyond November 1st – Currency Thoughts

Hopes Up that China-U.S. Truce on Trade Will Extend Beyond November 1st

October 27, 2025

(168) Reports have been optimistic out of Asia where U.S. Treasury Secretary Bessent and his Chinese counterparts have been holding talks that will lead to a broader truce to be signed at the end of this week by Presidents Trump and Xi that would avoid a sharply escalated trade war. One hopeful indication has been China’s apparent agreement on a 1-year delay of tighter rare earth rules.

Financial markets have learned to follow the short-term implications of the bouncing ball of U.S.-Chinese trade talks. Stock markets accordingly rallied in Asia this Monday where gains were recorded of 3.0% in South Korea, 2.5% in Japan, 1.7% in Taiwan, 1.9% in Indonesia, 1.2% in China and 1.1% in Hong Kong. In pre-open futures trading, the four major U.S. indices are up at least 0.5%, led by gains of 1.3% in the Nasdaq and 0.9% in the Russell 2000. In Europe so far, equities have risen 0.9% in Italy and 0.6% in Spain but show little change in Germany, France or the U.K.

The dollar is down by 0.6% against the Australian dollar, 0.4% relative to the South Korean won and 0.3% vis-a-vis the Mexican peso and sterling but shows scant net movement it is other closely watched relationships. The ten-year U.S. Treasury yield is two basis points higher, while other major 10-year sovereign debt yields have moved even less.

Gold‘s prices has dropped 2.2%, while Bitcoin is 0.6% higher. Oil is steady.

Financial market participants are under no illusion to assume that trade policy, let alone any of the other policy initiatives out of Washington, are settled once and for all. In that regard, a compelling case is made in the cover story of this week’s issue of The Economist “why China is winning the trade war” that concludes also that “the recent retreat from open commerce ultimately makes everyone a loser.”

Today’s most significant data release has been the IFO Institute’s monthly German business climate survey. The overall measure recovered 0.7 points from 87.7 in September to a two-month high of 88.4 this month. August experienced this year’s high score of 88.9, while a 55-month low of 84.8 was touched last December. The strength of October’s figures lay in future expectations, which at 91.6 exceeded September’s reading by 1.8 points and was the best score in 44 months. Alternatively, the index for current conditions slid to an 8-month low of 85.3.

Business confidence in Turkey improved to a 5-month high in October of 100.3 but still below last March’s reading of 104.1.

Consumer confidence in October rose to a 10-month high in Brazil but declined to an 8-month low in Finland.

Chinese industrial profits were 21.6% greater in September than a year earlier. Their nine-month total was 3.2% greater than  in January-September of 2024 in contrast to a 3.3% full-year decline posted last year.

Retail sales rose 4.1% and 3.5%, respectively, in Lithuania and Denmark on year-on-year basis in September.

The policy interest rate at the State Bank of Pakistan was again kept steady at 11.0%. 900 basis points of reduction were implemented in the final seven months of 2024 followed by 100 basis points cuts in January and May of 2025. That halved the rate from a 22% peak maintained between June 2022 and June 2024. Recently, however, Pakistani consumer price inflation has been spurred by the region’s floods and accelerated from as low of 0.3% in April to an 11-month high of 5.6% by September.

On Wednesday and Thursday of this week, the Federal Reserve, Bank of Japan and European Central Bank will be announcing interest rate decisions, and investors will see the first estimate of euro area GDP growth last quarter.

Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: German business climate index IFO, State Bank of Pakistan, U.S. Chinese trade talks

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