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Daily Economic Update
27.10.2025
US/China: Delegations agree on a trade framework ahead of Trump-Xi meeting on Thursday. US Treasury Secretary Bessent announced agreeing “a very successful [trade] framework,” ahead of a highly anticipated meeting between Trump and Xi on Thursday in South Korea. Although no concrete details were provided, talks focused on Chinese curbs on rare earth minerals, a resumption of its US soybean purchases, levies on ships, fentanyl issues and export controls among other matters. The Chinese mentioned that both parties “reached a basic consensus on arrangements to address their respective concerns”. Bessent also emphasized that Trump’s earlier threat of imposing additional 100% tariffs on Chinese imports as of November 1 was “effectively off the table.” The current trade truce between the two countries on the suspension of ‘prohibitively’ high reciprocal tariffs is set to expire on November 10, and the Trump-Xi meeting is expected to enhance its contours. Notwithstanding scant details on the scope and durability of any potential trade deal for now, markets cheered these developments, with US equity futures firmly in the green, gold down in trading this morning, and Asian equities up sharply. Earlier yesterday, as part of his Southeast Asia tour, Trump also confirmed trade deals with Thailand, Cambodia, Vietnam, and Malaysia that had previously set reciprocal levies of 19-20% on most goods from these countries besides providing tariff exemptions for certain goods. While Brazilian President Lula da Silva stated this morning that Trump “guaranteed” him a trade deal soon that could trim the 50% tariffs that are currently imposed on Brazilian goods. The upshot is that broader trade hostility seems to be fading steadily, providing a clearer operating environment for US and global businesses.
Oil: Prices surge after US imposes sanctions on Russia’s largest oil producers. Brent futures closed Friday at $65.9/bbl, surging 7.6% w/w (-11.7% ytd) and logging the best weekly gain since mid-June after the US announced sanctions on Russia’s largest oil producers Rosneft and Lukoil, which together account for nearly 5% of global supply. Indeed, President Trump is aiming to ramp up pressure on the Kremlin to return to the negotiating table and bring the Russia-Ukraine conflict to an end, with the planned Trump-Putin summit to be held in Budapest this week canceled as well. The EU also approved its 19th sanctions package against Russia, after Slovakia lifted its veto, with the EU widening its sanctioned list of vessels in Russia’s shadow fleet and adding two independent Chinese oil refiners to the list of targets as well. Nevertheless, it remains to be seen whether the new sanctions on Russia will yield tangible results on the global oil supply picture. Earlier in the year, the outgoing Biden administration had imposed sanctions on major Russian oil producers including Gazprom Neft and Surgutneftegas but these had little impact on Russian oil exports. Yet, Trump’s secondary tariff actions on buyers of Russian oil could shift the cost-benefit analysis and make it less worthwhile for the likes of India and China to continue with their imports.
Saudi Arabia: Trade surplus widens to a 15-month high in August. The merchandise trade surplus rose to a 15-month high of SR24 billion ($6.4bn) in August (+4.1% y/y), from a downwardly revised SR20 billion in July. This is the third consecutive month of improvement since May’s five-year low surplus of SR6.5 billion, supported by rising oil exports (+7% y/y) due to due to higher crude oil production and solid non-oil export growth (+5.5% y/y, including re-exports). Non-oil exports, which account for 33% of total exports, have seen sustained positive growth for almost two years, and August’s performance was led by machinery, mechanical and electrical equipment (+80% y/y) and precious stones/jewelry (+66% y/y), which more than compensated for a drop in vehicles, aircraft and transport equipment exports (+27% y/y). The higher exports more than offset the increase in imports (+7.4% y/y), which were driven mostly by a continued increase in imports of machinery, mechanical & electrical appliances (+25%) and vehicles & transport equipment (+6.1%), associated with the investment-driven expansion of the non-oil economy. We expect to see the improved trade balance performance sustained over the coming months, helped by the ongoing recovery in oil exports and solid non-oil export growth.
Egypt: €4bn in EU funds unlocked under deepening strategic partnership. During the first ever EU–Egypt summit held in Brussels, Egypt and the EU signed a memorandum of understanding to unlock a further €4bn from the macro-financial assistance package worth €5bn. The first tranche of €1bn was disbursed in December 2024. The new financing is part of the €7.4bn EU support package announced in March 2024, comprising €5bn in concessional loans, €1.8bn in investments, and €600mn in grants. Of the grant amount, €200mn will be directed toward migration management. Both sides also agreed to co-organize a business roundtable in 2026 to promote new investment partnerships. The next EU–Egypt Summit will take place in Egypt in 2027, with a roadmap to deepen cooperation across trade, energy – especially the green transition – and investment as well as security. Several new projects were also announced, including support for Egypt’s NWFE (nexus of water, food, and energy) initiative, green transformation programs, and digital infrastructure projects, such as the regional ‘Medusa’ submarine cable, and the expansion of the Helwan wastewater treatment plant. President Abdel Fattah El-Sisi called on European investors to view Egypt as “a reliable production partner,” highlighting opportunities in green hydrogen, EVs, pharmaceuticals, petrochemicals, logistics, and defense industries.
Global: Trump-Xi meeting and interest rate decisions by the Fed, ECB, BoJ key matters this week. President Trump’s ongoing tour in East Asia, especially his meeting with Chinese President Xi on Thursday is the key event this week. In the US, the Fed will meet on Tuesday-Wednesday, with the market widely expecting a 25-bps interest rate cut, and possibly new developments regarding the Fed’s balance sheet run-off. Signals for the December meeting and views on economic activities/labor market should take even more importance given the ongoing government shutdown. In the Eurozone, the ECB meets and is almost certain to leave rates unchanged on Thursday. GDP growth in Q3 (on Thursday) is seen at 0.1% q/q, same as growth in Q2, while inflation for October (on Friday) is expected to inch down to 2.1% y/y (from 2.2%) for the headline rate and to 2.3% (from 2.4%) for the core rate. In the UK, the Nationwide housing price index is due on Friday, and is seen dropping 0.1% m/m in October after a 0.5% increase in September. In China, the October official PMI is due on Friday with expectations for the manufacturing component to tick down to 49.6 (49.8 in September) and the non-manufacturing component to be stable at 50.0. Finally in Japan, the BoJ’s interest rate decision is due on Thursday with expectations for no change in rates. Attention will be on any clues for a move in December’s meeting and on an updated set of GDP and inflation projections. New Prime Minister Takaichi will meet President Trump on Tuesday.