Risk Aversion in Spite of Gaza Ceasefire and Trump’s “It Will All Be fine” Comment on Trade Tensions – Currency Thoughts
Risk Aversion in Spite of Gaza Ceasefire and Trump’s “It Will All Be fine” Comment on Trade Tensions
October 14, 2025
Equity markets and long-term sovereign debt yields faltered anew this Tuesday. China is lifting port fees against U.S. imports and accusing Trump of reigniting trade tensions between the two countries. In the middle east conflict, hostages and prisoners have been returned, but ensuing steps to cement a permanent peace in the region are being met with considerable skepticism all around.
Key U.S. equity market indices in futures trading prior to opening show losses of 0.6-1.1%, led by the Nasdaq and Russell 2000. In the Pacific Rim, stock exchanges closed down 2.6% in Japan, 2.2% in Indonesia, 1.7% in Hong Kong, 0.8% in Singapore and 0.6% in China. The German Dax and Paris CAC have lost 1.1% and 0.9% so far. Investor sentiment toward Germany recovered less than anticipated in October according to the monthly ZEW Institute survey, and French domestic politics remains precarious.
A 7-basis point drop in the 10-year British gilt yield leads the declines in Euroland of 2-4 basis points. The latest batch of U.K. monthly labor market data revealed developments that are likely to tilt the Bank of England toward more easing: a 50-month high in the jobless rate (4.8%), slower employment growth, and the weakest growth in regular pay (4.7%) in 39 months. The 10-year Japanese JGB yield and 10-year U.S. Treasury yield are down by 3 and 1 basis points, respectively.
Gold (up 0.3% overnight to another record high) is proving to be a better hedge against geopolitical uncertainty than Bitcoin whose price slumped by 3.2% overnight. WTI oil (down 2.1%) succumbed to speculation that the U.S. may tighten economic sanctions and provide Ukraine with weapons to damage Russian oil facilities.
The ZEW Institutes German investor expectations index printed at 39.3. That’s a second straight improvement but fell well short of analyst expectations and was accompanied 5-month low, deeply negative -80.0 reading for current economic conditions. Investor sentiment regarding all of the euro area worsened in two respects. Expectations dropped to a 5-month low, and current conditions slid three points more deeply into negative territory. Expected inflation eased to 1.7%.
Germany’s current account surplus narrowed to EUR 8.3 billion in August from EUR 15.4 billion a year earlier.
Ireland’s construction purchasing managers index fell for a sixth consecutive month, printing at 43.7 in September versus 53.9 last March.
A 2.0% year-on-year rise in British same-store sales in September was down from 2.9% in August and the smallest rise since June.
Chinese motor vehicle sales last month were 14.9% more plentiful than a year earlier.
Business confidence in Australia recovered to a 2-month high in September, while business conditions matched August’s 15-month high. The tone of minutes from the last Reserve Bank of Australia policy meeting, which had kept the Official Cash Rate at 3.60%, proved more cautious than anticipated. In addition to a sooner-than-expected recovery in personal consumption, monetary officials are watching a pick-up in home prices and signs that inflation last quarter might have exceeded expectations. The labor market is considered tight, and unfolding external developments like Chinese demand and trade frictions also justify caution.
Small business confidence in the United States, according to the NIFB index, dropped two points to a 5-month low in September and was weaker than analysts were anticipating.
As in July, the latest quarterly review of policy at the Monetary Authority of Singapore resulted in no changes. MAS officials target the weighted Singapore dollar index, rather than interest rates, defining three dimensions of the target band: its width, center and slope. All three parameters were left unchanged in both July and today, whereas the previous reviews in January and April had each reduced the allowed appreciation of the currency by flattening its slope but not adjusted the band’s center or width. According to a released statement, that earlier stimulus is still affecting the economy.
MAS has eased monetary policy twice this year. Singapore’s economic growth has turned out stronger than expected and the output gap will remain positive in 2025 and come in around 0% next year. MAS Core Inflation should trough in the near term and rise gradually over the course of 2026 as temporary factors dampening inflation fade.
Coincidentally, Singapore third-quarter GDP figures were also released today, and they showed a 1.3% quarterly increase. Set against the 14-quarter high 3.0% quarterly jump in the third quarter of 2024, the year-on-year growth rate slowed to a 2-year low of 2.5% from 4.5% in the second quarter.
Among price data reported today,
- German consumer price inflation in September was confirmed unchanged from the preliminary indication. Prices rose 0.2% on month and at a 9-month high of 2.4% year-on-year. Core inflation ticked up 0.1 percentage ponit to a 4-month high of 2.8%.
- Switzerland’s combined producer price and import price index fell in September by 0.2% on month and 1.8% on year. Domestic producer price and import prices were respectively 1.4% and 2.7% below year-earlier levels.
- Indian wholesale price inflation last month slowed unexpectedly last month to a mere 0.1% from 0.5% in August. Food and manufactured goods drove the deceleration, while fuel costs were somewhat less deflationary than in August.
- Finnish CPI inflation in September matched August’s pace and was at 0.5% for the sixth time in the last eight reported months.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British labor market data, Euroland and German ZEW expectations index, Indian wholesale prices, Monetary Authority of Singapore, Swiss PPI
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