EMEA Morning Briefing: Markets Weigh U.S.-China Trade Tensions

MARKET WRAPS

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EU foreign trade; U.K. GDP, industrial production, trade; trading updates from Nestle, Nordea, ABB, EssilorLuxottica, Pernod Ricard, Croda International, Whitbread, Investor AB, Lagardere

Opening Call:

European stock futures point to a lower open Thursday. Asian stock benchmarks advanced; the dollar and Treasury yields fell; while oil and gold futures gained.

Equities:

Stock futures declined early Thursday as markets weigh U.S.-China trade tensions. U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent condemned China's decision to step up curbs on its exports of rare-earth metals.

Though Bessent described China's actions as a "highly provocative move" during a Wednesday press conference, he said that as of Tuesday night, President Trump still planned to meet with Chinese leader Xi Jinping at the end of the month. "I believe China is open to discussion, and I am optimistic that this can be de-escalated ultimately," Bessent said.

Greer also noted that China's export controls haven't been implemented, nor has the U.S. moved forward with its tariff threats, leaving room for a de-escalation.

"I think de-escalation is still the path. It does not seem like the U.S. has a clear strategy of escalation and the market is certainly a constraint," said Rory Green, head of China research for TS Lombard.

Forex:

Expectations of two more rate cuts by the Fed this year have risen, weighing on the U.S. dollar, Chang Wei Liang at DBS said.

"Certainly, a prolonged government shutdown and renewed US-China trade tensions do not add to confidence. But there could be two-way volatility as well amid risks from US-China trade negotiations," he added.

Bonds:

The Fed will likely stop allowing its holdings of Treasury securities to shrink in February, economists at Goldman Sachs forecast, a decision they think the Fed could roll out at its January meeting.

Goldman's team previously thought that runoff would be allowed to continue through 1Q 2026, but Chair Jerome Powell's speech Tuesday suggests the Fed is working on a faster timetable.

Energy:

Oil futures rose early Thursday after closing lower overnight. "Bearish sentiment in the oil complex remains driven by concerns over the impact of escalating US-China trade tensions on global economic growth, as well as fears of a looming supply glut," OCBC said.

Meanwhile, Trump said Indian Prime Minister Narendra Modi told him that he plans to pause purchases of Russian oil. "He assured me there will be no oil purchased from Russia. Maybe that is breaking news."

Metals:

Gold was steady early Thursday, supported by expectations of ongoing central bank purchases.

Traders are trying to front-run the central banks by bidding up gold prices, said Fawad Razaqzada, market analyst at City Index and FOREX.com.

"With U.S.-China trade tensions being reignited in the last few days, investors have even more reason to hedge their long equity bets by diversifying into gold," he added.

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Sucden Financial thinks investors are likely to be more hesitant to force a decisive break above $11,000/t in the near term for copper, even if there is limited justification for outright market weakness amid prevailing physical tightness further down the curve.

"This points to a more cautious trading environment, where the support at $10,500/t will serve as a critical reference for sentiment and conviction," it added.

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Iron ore declined in Asian trading. Markets are likely concerned about softer demand following China's weak economic data, ANZ said. However, price dips are likely to be capped by further declines in steel inventories, with stockpiles falling, the bank added.

TODAY'S TOP HEADLINES

U.S. economy has lost momentum over the past 2 months, Fed's beige book finds

Reports from across the U.S. indicate sluggish economic conditions across much of the country, with only three of the Federal Reserve's 12 district banks reporting expanding activity in their regions, according to the Fed's new "beige book" survey.

The remaining nine districts reported either flat or contracting economic activity.

Bessent, Greer Condemn China's Rare-Earths Rules, Cite Hope for De-escalation

U.S. Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent condemned China's decision last week to step up curbs on its exports of rare-earth metals, calling the actions part of a broader plan by Beijing to control the world's supply chains.

Though Bessent described China's actions as a "highly provocative move" during a Wednesday press conference, he said that as of Tuesday night, President Donald Trump still planned to meet with Chinese leader Xi Jinping in South Korea at the end of the month. Greer also noted that China's export controls haven't been implemented, nor has the U.S. moved forward with its tariff threats, leaving room for a de-escalation.

Netanyahu Says He Has Won the War. Can He Win the Peace?

TEL AVIV-Israeli Prime Minister Benjamin Netanyahu has emerged as a wartime leader of a regional superpower, who resisted enormous pressure to halt its two-year conflict with Hamas and inflicted severe damage on Israel's enemies.

Now, the country's longest-serving prime minister faces an arguably more difficult challenge: How to lead Israel to a new era of peace.

Canada Threatens Stellantis With Legal Action Over Jeep Move to U.S.

Canada's Industry Minister Melanie Joly threatened Stellantis with legal action over the car company's plan to make midsize Jeeps in Illinois instead of Ontario.

Joly on Wednesday sent a letter to Stellantis Chief Executive Officer Antonio Filosa, in which she said the carmaker is in danger of defaulting on agreements it made with the Canadian government to keep intact its factory footprint in Ontario, in exchange for billions of dollars in subsidies.

HPE Expects Revenue Growth to Slow in Next Fiscal Year

Hewlett Packard Enterprise expects revenue growth to slow in its next fiscal year as it targets higher-growth businesses.

The server and cloud-software company said Wednesday it expects revenue growth of 5% to 10% in fiscal 2026, slowing from its latest projection for a 14% to 16% increase in the current fiscal year, which ends Oct. 31.

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Expected Major Events for Thursday

04:30/NED: Sep Unemployment

06:00/UK: Aug Index of production

06:00/UK: Aug UK trade

06:00/UK: Aug Index of services

06:00/UK: Aug Monthly GDP estimates

06:00/NOR: 3Q Business tendency survey

07:00/SVK: Aug New orders in industry

07:00/CZE: Sep PPI

08:00/ITA: Sep CPI

08:30/UK: 3Q Bank of England Credit Conditions Survey

08:30/UK: 3Q Bank of England Bank Liabilities Survey

08:30/UK: Jul Card Spending statistics

09:00/EU: Aug Foreign trade

09:00/ITA: Aug Foreign Trade EU

10:00/FRA: Aug OECD Harmonised Unemployment Rates

10:00/FRA: 2Q OECD Quarterly Labour Market Situation

11:30/UK: Sep NIESR Monthly GDP Tracker

23:01/UK: Sep Scottish Retail Sales Monitor

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

October 16, 2025 00:17 ET (04:17 GMT)