China GDP beats forecasts; euro recovers initial losses; oil dips on Russia waiver

Key points:

• The single currency began the week with losses as unrest in France intensified, drones were intercepted over the Black Sea, and a US diplomat cautioned against EU tech policies, but it later reversed much of its decline.
• Crude prices fell when Donald Trump approved a directive that suspended certain penalties and tariffs on Russian energy imports, paving the way for the US to take delivery of over 300,000 tonnes of Russian diesel.
• Downward pressure on oil was constrained by Houthi strikes on Saudi targets and Tehran's stipulations for resuming passage through the Strait of Hormuz.
• Vladimir Putin has suggested a trilateral discussion involving Donald Trump and Xi Jinping to address the conflict in Ukraine, potentially during the upcoming APEC summit.
• Chinese gross domestic product expanded 4.5% year-on-year in the third quarter, outperforming expectations, while retail consumption and factory output improved in September, despite ongoing weakness in capital expenditure.
• Christopher Kent, assistant governor at the Reserve Bank of Australia, noted that neutral interest rates seem to be trending up and raised doubts about the degree of restrictiveness in current policy.
• Kazuo Ueda, governor of the Bank of Japan, said that firmly anchoring underlying inflation is gaining significance and that suitably timed rate increases contribute to stability in Japanese government bonds.
• Precious metals gained slightly, funding for artificial intelligence data centers attracted increased examination, and the Qubic layer-1 network suspended its blockchain following a wallet compromise.

A wave of negative news out of Europe sent the euro sliding at the start of the week, with violent protests in France among the factors. Romania's military reported that its F-16 jets intercepted and destroyed two unmanned aircraft above its Black Sea territorial waters on Saturday. Simultaneously, the American envoy to the EU cautioned that European firms could face significant penalties in the United States should the bloc allocate satellite-to-phone spectrum exclusively to local providers—a restriction that would affect SpaceX. The envoy also criticised EU cloud regulations and the fines levied under the Digital Markets Act. The shared currency has regained almost all of its initial losses since then.

Crude oil declined after Donald Trump signed a presidential directive lifting some sanctions, restrictions, and tariffs on energy imports from Russia. Initial deliveries to the United States are forecast to exceed 300,000 tonnes of Russian diesel. The slide in oil prices was capped by news of additional Houthi assaults on Saudi Arabia, and by Tehran's repeated insistence that its plan to unlock the Strait of Hormuz hinges on Washington complying with its conditions.

In diplomatic news, Russia's Vladimir Putin has put forward a plan for a trilateral summit with Donald Trump and Xi Jinping in the coming month to negotiate an end to the Ukraine conflict, a gathering from which Ukraine would be absent, according to the Wall Street Journal. The Kremlin acknowledged discussions regarding a potential gathering but indicated that no final decision has been reached on its occurrence or the topics to be addressed; a high-ranking US representative stated that Trump has not yet consented to such a meeting.

Bullion moved upward, aided in part by the weaker energy prices.

China delivered the most significant economic figures of the day. GDP in the third quarter increased 4.5% year-on-year, surpassing the 4.4% projection and accelerating from 4.3% in the prior quarter—the weakest reading in over three years. The economy grew 1.2% from the previous quarter, above the anticipated 1.1%. Over the first three quarters, GDP rose 4.6%, falling inside the government's target range of 4.5% to 5.0%, a result that could reduce the impetus for additional stimulus measures. September indicators also strengthened: industrial production climbed 5.5%, the highest pace in six months, boosted by AI-related equipment exports, and retail spending advanced 1.1%, compared with 0.4% in August and the strongest performance since March. Investment remained the laggard, with fixed-asset outlays declining 7.2% over nine months and real estate investment dropping approximately 20.5%.

In remarks from central bank officials, Reserve Bank of Australia Assistant Governor Christopher Kent stated that robust evidence indicates that neutral rates of interest are trending upward both domestically and globally. He expressed confidence that current policy is moderately restrictive but queried whether it is sufficiently so. Kent observed that consumer demand is weakening, corporate lending remains robust, and alterations to property taxes have aided monetary policy. He urged caution against overinterpreting monthly employment figures but acknowledged that the labour market has loosened.

Bank of Japan Governor Kazuo Ueda emphasised the growing importance of fixing underlying inflation at approximately 2%, citing supply-side price pressures emanating from Middle Eastern energy expenses and demand-side inflation generated by robust AI-related demand. He reiterated that the central bank's schedule for reducing bond purchases remains unchanged and refrained from establishing predetermined triggers for intervention in the JGB market, mentioning sharp increases in yields or disturbances to market operations as potential considerations. Ueda stated that well-timed interest rate increases contribute to the stability of government bonds. The Japanese currency ticked upward but later relinquished its small improvements during the trading session.

Elsewhere, oversight over the expansion of US artificial intelligence infrastructure increased following accounts that at least 47 major data center initiatives were postponed, scrapped, or obstructed this year, while debt linked to AI infrastructure entities was being divested. In the cryptocurrency sector, the Qubic layer-1 token network ceased its blockchain operation after a malicious actor took advantage of insufficient randomness in wallet seed creation, removing roughly 2.94 trillion QU, worth about $1.3 million, from 1,404 wallets. Around 87% of the purloined tokens remain locked on the network, with its validators to determine the next steps regarding retrieval.

Going forward, market participants will monitor the durability of the euro's rebound amid evolving protests in France, oil's ability to offset softer Russian shipments with geopolitical dangers in the Middle East, and the possibility that stronger Chinese statistics and increasingly cautious central bank remarks alter interest rate forecasts.