Economic Insights for October 28, 2025
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https://www.cnbc.com/2025/10/27/trump-says-us-china-close-to-trade-deal-ahead-of-xi-talks-tiktok-decision.html
Global Market Outlook: Widespread Rally on Trade Deal Hopes
On October 28, 2025, global financial markets experienced a broad surge driven by heightened optimism over progress in US-China trade negotiations. Investor sentiment dramatically improved after US Treasury Secretary Scott Bessent announced a "very successful framework" had been established for the Trump-Xi Jinping summit. News that the two nations found common ground on core issues, including export restrictions, fentanyl, and agricultural trade, during weekend talks in Malaysia fueled a strong appetite for risk assets. However, the final outcome of the Trump-Xi meeting in South Korea on Thursday and the US Federal Reserve's interest rate decision are expected to dictate the future direction of the market.
1. Stock Market Trends
United States (S&P 500): The S&P 500 index surged 1.3% to a new all-time high. The Nasdaq rose 1.9%, and the Dow Jones climbed 350 points. The semiconductor sector led the gains, with Nvidia and Broadcom up 2.1% and 2.4%, respectively. Qualcomm jumped 9.5% to a new record high after announcing a new AI processor for data centers. Tesla rose 4.2% and Apple gained 1.3%. Attention is focused on the Q3 earnings reports this week from Alphabet, Amazon, Apple, Meta, and Microsoft, along with the widely expected 25 basis point Fed rate cut on Wednesday.
Japan (Nikkei 225): The Nikkei 225 index soared 2.46% to close at 50,512 points, also hitting a new all-time high. The Topix index rose 1.7% to 3,325. The market was boosted by expectations surrounding the Tuesday meeting between new Prime Minister Sanae Takaichi and President Trump, and optimism for a US-China trade agreement. Softbank Group (6.7%), Fujikura (8%), Advantest (6.5%), Kawasaki Heavy Industries (9%), and JX Advanced (7.1%) showed strength.
China (Shanghai Composite): The Shanghai Composite index climbed 1.18% to close at 3,997, a 10-year high. The Shenzhen Index rose 1.51% to 13,489. Hopes for a trade deal and the strong performance of industrial profits—which surged 21.6% year-on-year in September, the highest growth rate since November 2023—provided a positive backdrop. Tech and AI-related stocks led the rally, with Eoptolink, Zhongji Innolight, Victory Giant, Foxconn Industrial, and ZTE rising between 3% and 10.1%.
South Korea (KOSPI): The KOSPI index dramatically jumped 2.57% to close at 4,043, breaching the 4,000-point mark for the first time in history. Progress in the US-China trade talks and strong semiconductor demand drove the market. Anticipation for the Trump-Xi meeting at the APEC Summit boosted investor sentiment. Samsung Electronics (3.04%) and SK Hynix (4.90%) rallied on AI demand, while Hyundai Motor (0.59%), HD Hyundai Heavy Industries (4.88%), and KB Financial Group (3.65%) also gained.
United Kingdom (FTSE 100): The FTSE 100 held near its peak level around 9,650 but showed more limited gains compared to other European indices. Mining stocks suffered as gold prices fell below $4,000 per ounce, with Fresnillo and Endeavour plunging over 5%. HSBC declined after setting aside $1.1 billion in provisions for a Bernard Madoff Ponzi scheme-related lawsuit. Conversely, bank stocks were strong, with Standard Chartered up over 3% and Lloyds, NatWest, and Barclays all gaining more than 1.5%.
Germany (DAX): The DAX index rose 0.3% to close at 24,309, its highest level in about a week. The agreement news, including China's delay of rare earth export restrictions, the resumption of US soybean purchases, and cooperation on the fentanyl crisis, provided a positive catalyst. Technology stocks led the advance, with Infineon (2.4%), Siemens (1.3%), and SAP (0.9%) gaining. Porsche surged 3% on better-than-expected earnings and maintained annual guidance.
Brazil (Bovespa): The Bovespa index gained 0.6% to set an all-time record high of 146,969. President Lula's announcement after his meeting with President Trump at the Malaysia ASEAN Summit that he was "guaranteed" a bilateral trade agreement suspending the 50% tariff on US goods was a major positive. Bank stocks like Banco do Brasil (1.7%) and Banco Santander Brasil (1.1%), and cyclical stocks such as Marfrig (7%) and Magazine Luiza (5.6%) were strong.
India (BSE Sensex): The Sensex index rose 0.7% to 84,778.8, the highest level since September 2024. US-China trade optimism and Fed rate cut expectations facilitated an inflow of emerging market capital. The Finance Ministry's September economic report cited solid growth prospects driven by domestic demand, favorable monsoons, low inflation, and recent GST rate cuts. Reliance Industries and Bharti Airtel rose over 2%, but Kotak Mahindra Bank fell 1.8% on an 11% decline in Q3 net profit.
2. Commodity Trends
Oil Prices: WTI Crude Oil futures are trading around $61.5 per barrel. Initial gains on US-China trade deal hopes were limited by concerns over oversupply. US sanctions against Russia's Rosneft and Lukoil provided some supply support, but the International Energy Agency (IEA) projects the market will remain in oversupply as production increases from the "American Quintet" (US, Canada, Brazil, Guyana, Argentina) are expected to outpace demand growth.
Gold: Gold prices plunged over 2.5% to the $4,000 per ounce level, hitting a nearly two-week low. This reflects a decline in safe-haven demand following the progress in US-China trade negotiations. The preliminary agreement on export restrictions, fentanyl, agricultural purchases, and shipping tariffs weakened risk-aversion sentiment. Despite the drop, gold is still up 54% this year, supported by economic and geopolitical uncertainties, US rate cut expectations, central bank buying, and ETF inflows.
Soybeans: Soybean futures rose to $10.60 per bushel, reaching their highest level since late June. Prices were lifted by expectations of China's resumption of soybean purchases as part of the trade deal. Treasury Secretary Bessent indicated that China is expected to purchase a "significant" amount of soybeans under a final agreement. On the supply side, Brazil is projected to expand its soybean acreage by 3.5% to 121 million acres, while Argentina's September soybean crush reached 4.13 million tons, an 11-month high.
Copper: Copper futures are near a three-month high, surpassing $5.1 per pound. The price was underpinned by optimism for a US-China trade deal, with Secretary Bessent stating that President Trump's threat of 100% tariffs was "off the table." China also agreed to a one-year delay on expanding its rare earth export restrictions. Supply disruptions also provided support, with Freeport-McMoRan lowering its sales outlook due to an incident at Indonesia's Grasberg mine, and production issues at Chile's Codelco El Teniente mine and major mines in the Dominican Republic and the Democratic Republic of Congo.
Steel: Chinese rebar futures rebounded to 3,060 yuan per ton. China's efforts to curb steel overcapacity resulted in September steel production falling 4.6% year-on-year to 73.5 million tons, a near two-year low. This aligns with Beijing's anti-overcapacity campaign aimed at restraining manufacturing oversupply and easing deflationary pressures. Government announcements prioritizing growth toward services and technology over goods production further reinforced the outlook for steel capacity reduction.
Wheat: Wheat futures soared over 2%, surpassing $5.20 per bushel to their highest level since late September. Progress in US-China trade talks sparked optimism, with Secretary Bessent's mention of China's resumption of significant soybean purchases having a positive effect across the broader grain market. However, supply capacity is limiting further price increases, with Russian consultancy SovEcon raising its 2025 Russian wheat production forecast to 87.8 million tons, and Argentina expected to hit its 2021-22 record with 23 million tons of production.
3. Bond Market Trends
US 10-Year Treasury Yield: Rose slightly to the 4.03% level, a one-week high. This reflects investors adjusting positions ahead of Thursday's Trump-Xi summit and the Fed's rate decision this week. The market is almost fully pricing in a 25bp rate cut after lower-than-expected inflation data on Friday, but the ongoing government shutdown is constraining investor sentiment.
Japan 10-Year Government Bond Yield: Held steady around 1.66%. September core inflation accelerated for the first time since May, with both headline and core inflation rising to 2.9% from 2.7% in August, but this had little impact on yields. The Bank of Japan is expected to hold rates this week, but with tariff-related risks easing, discussions on conditions for a rate hike resumption are anticipated. There is also speculation that PM Takaichi will announce a large-scale stimulus package next month, surpassing last year's ¥13.9 trillion.
China 10-Year Government Bond Yield: Rose to 1.79%, a two-week high, as investors shifted to riskier assets due to progress in US-China trade talks. September industrial profits surged 21.6% year-on-year, the highest growth since November 2023, with cumulative profits for Jan-Sept also rising 3.2%, the first cumulative increase this year, signaling corporate recovery. The People's Bank of China continued its net liquidity injection for the eighth consecutive month, supplying a net 200 billion yuan in October.
South Korea 10-Year Government Bond Yield: Rose by 0.04%p from the previous close to 2.95% on October 27. While up 0.01%p over the past month, it is 0.16%p lower than a year ago.
Germany 10-Year Government Bond Yield: Rose to the 2.63% level, a nearly two-week high, as investors adjusted positions ahead of global trade negotiations, central bank decisions, and key economic data releases. The European Central Bank is expected to hold rates at its meeting on Thursday, and Germany will release its Q3 GDP flash estimate, October inflation, and consumer sentiment data this week. The better-than-expected October Ifo Business Climate Index suggested resilience in Europe's largest economy.
United Kingdom 10-Year Government Bond Yield: Fell to 4.4%, the lowest since mid-December, as softer-than-expected Consumer Price Index (CPI) data increased the likelihood of an earlier Bank of England rate cut. September headline inflation held at 3.8%, missing the 4% forecast, and core inflation fell to 3.5% from 3.6%, below the 3.7% forecast. Markets anticipate the BoE will begin cutting rates as early as February due to slowing inflation and signs of a cooling labor market.
Brazil 10-Year Government Bond Yield: Fell to the 13.9% level. Easing US-China trade tensions reduced external risk premium, while soft global growth signals and falling US Treasury yields lowered long-term rates. Domestically, lower inflation figures bolstered the dovish camp within the central bank, and Brazil's high real policy rate continues to offer carry appeal, attracting foreign inflows.
India 10-Year Government Bond Yield: Maintained near a four-week high around 6.54%. Investors are watching the progress of US-India trade talks, with a bilateral deal under discussion that could reduce US tariffs from 50% to 15-16% in exchange for India phasing out its purchase of Russian oil. Commerce Minister Piyush Goyal, however, stressed that India would not accept conditions that restrict its trade options. The market still anticipates a December rate cut, with nearly $1 billion in foreign inflows for the third consecutive month supporting the market.
4. Currency Trends
US Dollar: The Dollar Index fell slightly to the 98.8 level, giving back some of last week's gains. Investors adjusted positions ahead of Thursday's Trump-Xi meeting and the Fed's rate decision. The market is nearly fully pricing in a 25bp rate cut after lower-than-expected inflation data on Friday. The dollar weakened most significantly against the Australian and New Zealand dollars amid risk-on sentiment.
Japanese Yen: Weakened to ¥153 per dollar, nearing its weakest level since February. The yen was pressured by expectations of aggressive fiscal expansion from the new government and uncertainty over the Bank of Japan's policy outlook. The currency has depreciated sharply since PM Takaichi took office, as she is expected to pursue expansionary fiscal measures and support accommodative monetary policy. A large-scale stimulus package, potentially exceeding last year's ¥13.9 trillion, is also being discussed for next month.
Chinese Yuan: The offshore yuan strengthened to ¥7.11 per dollar, a four-week high, as improved investor sentiment followed progress in US-China trade negotiations. Initial agreements on export restrictions, fentanyl, agricultural trade, and shipping tariffs in the Malaysia talks fueled hopes for a final deal at Thursday's summit. The 21.6% surge in September industrial profits and the 3.2% cumulative increase for Jan-Sept also provided support.
South Korean Won: Strengthened to ₩1,430 per dollar, rebounding from a six-month low in the previous session. The weak dollar and expectations for major policy and trade announcements supported the won. President Jae-Myung Lee is scheduled to meet with Presidents Trump and Xi at the APEC Summit in Gyeongju, with markets watching for broader commitments on US-Korea trade and tariff discussions, as well as supply chain and semiconductor cooperation.
British Pound: Weakened to $1.33, a one-week low. Softer-than-expected inflation data triggered speculation of an early Bank of England rate cut. September headline inflation held at 3.8%, missing the 4% forecast, and core inflation fell to 3.5% from 3.6%, below the 3.7% forecast. Shadow Chancellor Rachel Reeves plans to announce a set of policies "to bring down the costs facing families" in the November 26 budget. Markets anticipate the BoE will begin cutting rates early next year.
Euro: Held steady around $1.16. The currency enters a significant week with global trade negotiations, central bank meetings, and key European economic data releases scheduled. Investors hope the preliminary agreement framework discussed over the weekend will be finalized at Thursday's Trump-Xi summit. The ECB is expected to hold rates on Thursday, and the Eurozone will release its Q3 GDP flash estimate and October inflation data this week.
Brazilian Real: Strengthened to over R$5.4 per dollar, further rebounding from a two-month low of R$5.52 on October 10. Easing US-China trade risk premium, broad dollar weakness, and solid external demand improved the short-term export outlook. The dollar's weakness, driven by the US government shutdown and increased likelihood of a Fed rate cut, attracted cross-border funds into high-yielding Brazil. The high real interest rate maintains carry appeal, and China's economic activation and rising commodity prices support export revenue projections.
Indian Rupee: Weakened to ₹88.2 per dollar, retreating from a two-month high of ₹87.7 on October 22. Strong dollar demand acted as the Reserve Bank of India eased its defense of the rupee. High energy prices and a dovish monetary policy outlook supported domestic foreign exchange demand. Indian refiners' decision to stop purchasing cheaper Russian oil due to increased US sanctions on the Russian oil sector means India must buy more expensive oil, and the surge in global energy prices is exacerbating currency outflows from the G20's highest-growth nation. However, reports that the US may cap Indian tariffs at 15-16% in exchange for a significant reduction in Russian energy dependence have partially eased pressure on the rupee.
Future Outlook: Key Variables Await Amid Trade Deal Hopes
1. US-China Trade Negotiations: The Market's Biggest Variable
The Trump-Xi Jinping summit in South Korea on Thursday is the key variable that will determine the market's future direction. Reports suggest the two nations agreed to a one-year delay on China's rare earth export restrictions, the avoidance of 100% tariffs, and the resumption of Chinese purchases of US soybeans during the weekend talks in Malaysia. This is interpreted as a signal of substantial improvement in the bilateral relationship, and a final agreement would lead to the stabilization of global supply chains and the normalization of trade flows.
However, caution is warranted as a summit outcome falling short of market expectations could trigger a sell-off. The semiconductor, technology, and commodity sectors are expected to react most sensitively to progress in the trade agreement. The delay in China's rare earth export restrictions is positive for advanced industries, while the resumption of agricultural trade will benefit both US farm regions and China's food security.
2. Central Bank Policies: The Choices of the Fed and ECB
The US Federal Reserve's interest rate decision on Wednesday is the second major event. The market is nearly fully pricing in a 25bp rate cut, supported by lower-than-expected inflation data released on Friday. A rate cut would likely accelerate capital inflows into emerging markets and prolong dollar weakness. However, the impact of the ongoing government shutdown on economic data collection and policy implementation must be closely monitored.
The European Central Bank is expected to keep rates on hold on Thursday, but Germany's Q3 GDP and October inflation data will influence future policy direction. The better-than-expected German Ifo index is positive, but structural weakness in the European economy remains a concern. The Bank of Japan is also likely to maintain rates, but the possibility of a large-scale fiscal stimulus from the Takaichi government could increase yen weakness and inflationary pressure.
3. Big Tech Earnings: Determining the Direction of Tech Stocks
Q3 earnings reports from Big Tech giants like Alphabet, Amazon, Apple, Meta, and Microsoft are scheduled for this week. Key areas of interest include the effect of AI investments, cloud growth, and the recovery of advertising revenue. Just as Qualcomm's 9.5% surge followed its AI processor announcement, AI-related results and forecasts can significantly move the market.
The semiconductor sector is benefiting from the dual tailwinds of the US-China trade agreement and strong AI demand. Nvidia, Broadcom, Samsung Electronics, and SK Hynix are emerging as key beneficiaries, and Chinese semiconductor-related stocks are also continuing their strength on domestic industrial profit surges and trade improvement hopes.
4. Commodity Market: Gold Weakness vs. Strong Agriculture and Industrial Metals
The over 2.5% drop in gold prices reflects a strengthening of risk-on sentiment. While the decline in safe-haven demand may persist in the short term, given this year's 54% gain, it could be seen as a buying opportunity during a correction. Gold would regain strength if geopolitical risks or trade negotiations break down.
Conversely, industrial metals and agricultural commodities such as copper, soybeans, and wheat are strong on trade normalization hopes. Specifically, China's resumption of soybean purchases will directly benefit US agricultural regions, and copper has further room to rise due to supply disruptions and recovering Chinese demand. The 21.6% surge in China's industrial profits signals a manufacturing recovery, supporting increased demand for industrial raw materials.
5. Emerging Markets: Expected Acceleration of Capital Inflows
The Fed's rate cut and dollar weakness create a favorable environment for emerging markets. India has recorded nearly $1 billion in foreign inflows for three consecutive months, and Brazil continues to attract carry trade funds with its high real interest rates. South Korea broke the 4,000-point mark to hit an all-time high, driven by the APEC summit and robust semiconductor demand.
However, the Indian Rupee is under pressure from rising energy prices and the cessation of Russian oil purchases. Negotiations are underway where the US may cap Indian tariffs at 15-16% in exchange for reducing reliance on Russian energy, which will significantly impact India's trade balance and monetary policy.
6. European Markets: Potential for Continued Relative Weakness
The UK's FTSE 100 showed relative weakness compared to other major indices due to the sharp drop in mining stocks following the fall in gold prices. The $1.1 billion litigation provision by HSBC was also a burden. However, bank stocks are strong due to solid fundamentals and potential for consolidation, suggesting the financial sector will support the UK market.
Germany saw only a modest gain, but the technology-led rise is positive. The Eurozone awaits Q3 GDP and October inflation data, which will be crucial indicators for the ECB's future policy direction. If structural weaknesses in the European economy persist, relative underperformance compared to the US and Asian markets may continue.
Investment Strategy
Short-Term Strategy: Volatility may increase ahead of the two major events: Thursday's Trump-Xi summit and Wednesday's Fed rate decision. As trade deal expectations are high, excessive leverage should be avoided due to the potential for a disappointment sell-off. Big Tech earnings releases will also increase tech stock volatility, necessitating position adjustments. Semiconductor and AI-related stocks have a double tailwind of a trade agreement and strong earnings potential, but significant gains mean profit-taking pressure also exists. Managing risk through staggered buying is advisable.
Medium-Term Strategy: If the Fed's rate-cutting cycle officially begins, emerging market assets will become more attractive. Diversified investment in emerging markets with solid fundamentals, such as India, Brazil, and South Korea, could be considered. South Korea, in particular, has strong medium-to-long-term investment appeal due to robust semiconductor demand and trade improvement as structural tailwinds. Agricultural and industrial metals have medium-term upward momentum from recovering Chinese demand and trade normalization. Selective investment in soybeans, copper, and wheat can be reviewed, with copper being particularly noteworthy due to ongoing supply disruptions.
Long-Term Strategy: If the improvement in US-China trade relations leads to structural change, global supply chains will stabilize, trade volumes will increase, and world economic growth will accelerate. This is positive for multinational corporations, logistics, and manufacturing sectors overall. However, geopolitical risks have not entirely disappeared, and friction during the implementation of any agreement is possible. A balanced approach to technology, semiconductors, emerging markets, and commodities is necessary, with thorough portfolio diversification and risk management. Despite the short-term correction, gold maintains its value as a long-term portfolio hedge. It is advisable to maintain a gold holding of 5-10% of the overall portfolio.
Conclusion
The global market on October 28, 2025, showed a broad advance fueled by optimism over progress in US-China trade talks. Major indices in the US, Japan, China, and South Korea hit all-time highs or multi-year peaks, with optimism prevailing. Semiconductors and technology stocks led the gains, and agricultural and industrial metals strengthened on trade normalization hopes, while gold plummeted due to reduced safe-haven demand.
This week is concentrated with key market-moving events: the Trump-Xi Jinping summit on Thursday, the Fed rate decision on Wednesday, and Big Tech earnings releases. A final trade agreement would be a positive turning point for the global economy, but a cautious approach is necessary given the potential for a sell-off if expectations are not met.
In the medium to long term, the Fed's rate-cutting cycle, China's economic recovery, and accelerated capital inflows into emerging markets are expected to create a favorable investment environment. However, risk factors such as the government shutdown, geopolitical uncertainty, and the potential for a re-ignition of inflation still exist, making diversified investment and risk management crucial for a balanced portfolio.
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