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Tuesday, October 28, 2025
What’s happening: European stocks closed higher on Monday, hitting record highs, ahead of the US-China trade talks.
What happened: Equity markets in Europe gained for the third straight session as prospects of easing US-China trade tensions provided a boost to investor risk appetite.
Although financial and tech stocks rose, weakness in healthcare stocks limited the overall gains in the major stock indices during the session.
Why it matters: Global sentiment revived due to positive signals from US and Chinese officials. Prospects of the world’s two largest economies gearing up to reduce trade restrictions supported investor sentiment on Monday.
US President Donald Trump and China’s President Xi Jinping are scheduled to meet on Thursday. An agreement between the two countries is expected to pause the massive tariffs announced by the White House and remove the rare earths export controls placed by Beijing.
Meanwhile, markets expect the European Central Bank to keep its benchmark interest rates unchanged, while the Federal Reserve is projected to slash rates this week.
Data released on Monday showed that bank lending to households in the Eurozone surged by 2.6% year-over-year in September, reaching the highest level since March 2023. The Ifo Business Climate Index for Germany jumped to 88.4 in October, from 87.7 in the previous month, topping market estimates of 88. The expectations index climbed to 91.6 from 89.7, while the current conditions declined to 85.3 from 85.7.
Shares of Porsche gained 3% on Monday after the carmaker reported a narrower-than-expected operating loss. Tech stocks like ASML, Infineon and Prosus also closed higher amid expectations of strong earnings reports from the Magnificent Seven (Mag 7) companies later this week. European banking stocks also rose sharply, gaining around 1.2%.
Bucking the overall market trend, healthcare shares declined 0.5% on Monday. Shares of Novartis declined after the drugmaker announced plans to acquire US company Avidity Biosciences for approximately $12 billion in cash.
The STOXX Europe 600 Index gained 0.22% to close at 577.03 on Monday, while FTSE 100 rose almost 0.1% to 9,653.82. Germany’s DAX 40 jumped 0.28% to settle at 24,308.78, while France’s CAC 40 added 0.16% to reach 8,239.18. Italy’s benchmark index was the top performer in the region, gaining 1%, driven by a surge in banking stocks.
What to watch: Data on the ECB consumer inflation expectations (1300 UAE Time) will be released today. Median consumer inflation expectations in the Eurozone, which rose to 2.8% in August from 2.6% in the previous month, are expected to ease to 2.7% in September.
Investors will continue monitoring comments from US and China officials regarding the easing in trade barriers.
Context: The AUD/USD forex pair gained this morning as investors monitored the monetary policy outlook.
Details: Investors in Australia lowered their expectations of a rate cut by the Reserve Bank of Australia next week. Markets are now seeing only a 15% probability of the RBA cutting rates after the central bank’s Governor Michele Bullock reiterated that the EU labour market remained tight, despite the unemployment rate recently climbing more than expected.
The jobless rate in Australia surged to 4.5% in September, recording the highest level since November 2021. The figure also came in higher than market expectations of 4.3%.
Weakness in the US dollar provided a boost to the AUD/USD pair this morning. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell more than 0.1% to 98.68.
The AUD/USD forex pair gained around 0.1% to 0.6562, while the S&P/ASX 200 fell 0.38% to 9,020.90 this morning.
What to watch: Data on Australia’s inflation rate will be released on Wednesday. The annual inflation rate, which eased to 2.1% in the second quarter from 2.4% in the previous two periods, is expected to surge to 3% in the third quarter.
Analysts expect Australia’s Consumer Price Index to rise to 143.1 in the third quarter from 141.7 points in the second quarter and 140.7 points in the first quarter. Australia’s monthly Consumer Price Index, which rose 3.0% year-over-year in August, up from 2.8% in the previous month, is expected to surge 3.1% in September.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.71%, 1.23% and 1.83%, respectively.
US President Donald Trump slammed Russia’s testing of a nuclear-powered cruise missile and urged President Vladimir Putin to end the ongoing Ukraine war. The news sent the USD/RUB pair lower in forex trading this morning.
US President and Malaysia’s Prime Minister Anwar Ibrahim announced a trade and critical minerals deal, which lent support to the MYR/USD forex pair.
South Korea’s Composite Consumer Sentiment Index fell to 109.8 in October, from 110.1 in September, which sent the KRW/USD pair lower in forex trading this morning.
Mexico’s trade deficit widened to $2.4 billion in September, from $1.5 billion in the year-ago period. The latest reading coming in worse than market expectations of $1.3 billion exerted pressure on the MXN/USD forex pair.
Brazil’s FGV-IBRE Consumer Confidence Index surged to 88.5 in October, from 87.5 in the previous month. The latest reading being the highest since December 2024 sent the BRL/USD pair higher in forex trading this morning.
Italy’s business confidence (1300 UAE Time), consumer confidence (1300 UAE Time), 10-year BTP€i auction (1410 UAE Time) and 2-year BTP Short Term auction (1410 UAE Time), UK’s Index-linked Treasury Gilt 2035 auction (1400 UAE Time), Germany’s 5-year Bobl auction (1430 UAE Time), India’s industrial production (1430 UAE Time) and manufacturing production (1430 UAE Time), South Africa’s 2033 Bond auction (1430 UAE Time), 2038 Bond auction (1430 UAE Time) and 2044 Bond auction (1430 UAE Time), France’s unemployment benefit claims (1500 UAE Time) and jobseekers total (1500 UAE Time), Mexico’s unemployment rate (1600 UAE Time), as well as US Redbook index (1655 UAE Time), S&P/Case-Shiller home price (1700 UAE Time), Richmond Fed manufacturing index (1800 UAE Time), Richmond Fed services revenues index (1800 UAE Time), Dallas Fed services index (1830 UAE Time), Dallas Fed services revenues index (1830 UAE Time), 52-week Bill auction (1930 UAE Time), 7-year Note auction (2100 UAE Time) and money supply (2100 UAE Time).
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