Εβδομαδιαία Επισκόπηση: Διεθνής Οικονομία & Αγορές, 13/10/25
The flare up in US - China trade relations became a major source of market volatility
Shifts in the global trade and geopolitical environment continue to produce policy unpredictability. President Trump announced on October 10th that further tariffs of +100% will be applied as of November 1st to imports of goods from China, alongside export controls on “critical software”.
The move came mostly in response to China expanding its rare earths export controls, via adding 14 foreign entities into its Unreliable Entity List, most of which are based in the US. Recall that rare earth minerals are crucial for the manufacturing sector, especially for the high-tech segment, with China representing c. 70% of the respective global mining and accounting for over 90% of global production of processed rare earths.
Although President Trump commented later that “it will all be fine” with China, the latest developments have reinvigorated the uncertainty regarding the US – China trade conditions. Note that Presidents Trump and Xi were scheduled to meet in South Korea at the end of October, leaving room for de-escalation.
Trade uncertainty interrupted the equity market rally. Following fresh record highs for most major indexes, the MSCI ACWI shed -2.1% on Friday, with the S&P500 down by -2.7%, albeit the latter partly recovered on Monday October 13th (+1.6%) following comments from US President Trump which were viewed as somewhat benign.
US Treasury bond yields decreased on Friday by -10 bps at the 10-year tenor to 4.05% as increasing safe-haven demand bid prices. At the same time, gold prices edged up to fresh record highs of $4111/ounce on Monday October 13th.
Note that the partial federal US Government shutdown continues (initiated on October 1st). The shutdown has put on hold most of the economic data releases. Having said that, September’s CPI will be released, albeit with a 10-day delay on October 24th. The FRB Cleveland’s Inflation Nowcasting model points to +3.0% yoy for both the headline and the core CPI, from +2.9% & +3.1% yoy, respectively, in August.
The political saga in France continues, with President Macron reassigning Mr. Lecornu as Prime Minister (PM), a few days after the latter resigned. The main challenge remains the quest for a sufficient consensus in the Parliament for a 2026 Budget and more broadly for a substantial improvement in France’s fiscal path. Recall than Mr. Lecornu is the 5th PM in less than 2 years. French government bond yield spreads at the 10-year tenor have been broadly stable at 83 bps (2025 average: 73 bps, 2024 average: 64 bps).
On a positive note, Israel and Hamas have entered a ceasefire, implementing the first stage of a deal in which the US and various Arab countries acted as mediators, to end the Gaza conflict.
In all, respective developments are expected to remain under close monitoring, with the path towards a sustainable peace in the region being unstable as important sticking points in the peace plan remain. Oil prices have moved lower by circa -5% month-to-date to $63 per barrel (-15% year-to-date) on easing geopolitical uncertainty and abundant supply from OPEC members.
Shifts in the global trade and geopolitical environment continue to produce policy unpredictability. President Trump announced on October 10th that further tariffs of +100% will be applied as of November 1st to imports of goods from China, alongside export controls on “critical software”.
The move came mostly in response to China expanding its rare earths export controls, via adding 14 foreign entities into its Unreliable Entity List, most of which are based in the US. Recall that rare earth minerals are crucial for the manufacturing sector, especially for the high-tech segment, with China representing c. 70% of the respective global mining and accounting for over 90% of global production of processed rare earths.
Although President Trump commented later that “it will all be fine” with China, the latest developments have reinvigorated the uncertainty regarding the US – China trade conditions. Note that Presidents Trump and Xi were scheduled to meet in South Korea at the end of October, leaving room for de-escalation.
Trade uncertainty interrupted the equity market rally. Following fresh record highs for most major indexes, the MSCI ACWI shed -2.1% on Friday, with the S&P500 down by -2.7%, albeit the latter partly recovered on Monday October 13th (+1.6%) following comments from US President Trump which were viewed as somewhat benign.
US Treasury bond yields decreased on Friday by -10 bps at the 10-year tenor to 4.05% as increasing safe-haven demand bid prices. At the same time, gold prices edged up to fresh record highs of $4111/ounce on Monday October 13th.
Note that the partial federal US Government shutdown continues (initiated on October 1st). The shutdown has put on hold most of the economic data releases. Having said that, September’s CPI will be released, albeit with a 10-day delay on October 24th. The FRB Cleveland’s Inflation Nowcasting model points to +3.0% yoy for both the headline and the core CPI, from +2.9% & +3.1% yoy, respectively, in August.
The political saga in France continues, with President Macron reassigning Mr. Lecornu as Prime Minister (PM), a few days after the latter resigned. The main challenge remains the quest for a sufficient consensus in the Parliament for a 2026 Budget and more broadly for a substantial improvement in France’s fiscal path. Recall than Mr. Lecornu is the 5th PM in less than 2 years. French government bond yield spreads at the 10-year tenor have been broadly stable at 83 bps (2025 average: 73 bps, 2024 average: 64 bps).
On a positive note, Israel and Hamas have entered a ceasefire, implementing the first stage of a deal in which the US and various Arab countries acted as mediators, to end the Gaza conflict.
In all, respective developments are expected to remain under close monitoring, with the path towards a sustainable peace in the region being unstable as important sticking points in the peace plan remain. Oil prices have moved lower by circa -5% month-to-date to $63 per barrel (-15% year-to-date) on easing geopolitical uncertainty and abundant supply from OPEC members.