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Daily Economic Update
20.10.2025
Oil: Prices log third weekly decline amid trade, oversupply concerns. Brent futures settled at $61.3/bbl on Friday, down 2.3% w/w, after falling to their lowest level in five months on Thursday, weighed down by renewed US-China trade tensions as well as growing concerns over a near-term supply glut. US President Trump’s sharp rhetoric and the escalation of tariffs against China has reignited fears about the global macroeconomic outlook, with these concerns extending to already-subdued oil demand growth projections for 2025 and 2026. Nevertheless, both countries struck a more conciliatory tone earlier in the week, and the Trump-Xi meeting is still scheduled to take place during the APEC summit on October 31–November 1. Despite this apparent de-escalation, market sentiment remained under pressure, largely due to the IEA’s increasingly bearish supply outlook, after the agency’s monthly oil market report projected a 4 million barrels per day (mb/d) surplus in 2026, which would be comparable to the supply glut seen during the Covid-19 pandemic. Signs of this impending surplus are already evident in the data, with oil-on-water volumes reaching over 1 billion barrels, the largest since 2020. Meanwhile, the front end of the Brent futures price curve is edging closer to shifting into a contango structure (near-term prices being lower than longer-dated prices) with the front-month premium narrowing as supplies become both cheaper and more readily available. Moreover, oil’s geopolitical risk premium was easing further after President Trump and Russian President Vladimir Putin agreed to meet in Hungary within the next two weeks to discuss ending the war in Ukraine. After the Trump-mediated ceasefire agreement between Hamas and Israel brought the worst of the hostilities and destruction to an end in Gaza, the oil markets view the ongoing Russia-Ukraine conflict and especially the latter’s attacks on Russian energy infrastructure as the last major source of current supply-side geopolitical risk. Further adding to the bearish tone, the US Energy Information Administration’s weekly report showed another commercial crude oil stock buildup (+3.5 mb w/w) as crude production rose to a record 13.64 mb/d in the week-ending October 10, defying the lower price environment. The US, meanwhile, announced that India will cease purchasing Russian oil, having already cut its imports by 50%. However, this remains to be seen, as high-frequency data indicates that India’s imports of Russian oil are actually on track to rise by 20% rather than fall this month.
China: GDP growth in Q3 in line with expectations, with solid industrial production in September but very weak fixed-asset investment. China’s GDP grew 4.8% y/y in Q3, slowing down from the 5.2% recorded in Q2 but matching expectations. Economic momentum is easing amid trade tensions, an ongoing property slump, and weak consumer demand. September sector-level data showed retail sales posting their smallest annual increase in a year (+3.0%), despite ongoing consumer subsidies, though this was slightly above forecasts (2.9%). The unemployment rate edged down (5.2%) but remained close to August’s six-month high. In contrast, industrial output rose at its fastest pace in three months (6.5% y/y), likely boosted by pre-Golden Week production activity. However, fixed-asset investment came in some way below forecasts, falling by 0.5% y/y in 9M2025, its first drop since 2020. New house prices fell by 2.2% y/y (-2.5% in August), though the pace of decline has gradually eased over the past 11 months. Finally, the People’s Bank of China held its benchmark lending rates steady for the sixth consecutive month, keeping the one-year loan prime rate at 3.0% and the five-year rate at 3.5%, in line with expectations.
Global: CPI inflation in the US, UK and Japan, and flash October PMIs across major markets key releases this week. In the US, despite the ongoing government shutdown, the BLS will report the September CPI on Friday, with the consensus forecast pointing to a higher headline rate of 3.1% y/y from August’s 2.9% but a steady core rate of 3.1%. The S&P Global flash PMIs for October are due on Friday, and the services measure is expected to ease to 53.5 from 54.2 in September. In the Eurozone, the flash PMIs for October are due on Friday with the services component seen inching up to 51.4 from 51.3 in September while the manufacturing one is expected to fall to 49.5 from 49.8. In the UK, CPI inflation for September is due on Wednesday, and the street projects increasing headline and core rates of 4% y/y and 3.7% from 3.8% and 3.6%, respectively, in August. Retail sales for September (due on Friday) are seen falling by 0.2% m/m after rising 0.5% in August. In China, the Central Committee of China's Communist Party will hold the Fourth Plenum, a closed-door meeting, from Monday to Thursday. The country’s five-year development plan over 2026-2030 will be one of the issues up for discussion. Finally in Japan, in political developments, LDP leader Takaichi is set to form an alliance with an opposition party to boost her PM bid ahead of the parliamentary vote on Tuesday. In data releases, on Friday, September’s core CPI inflation is expected to rise to 2.9% y/y from 2.7% in August, while the S&P Global flash manufacturing PMI for October is seen inching up to 48.6 (48.5 in September).
Egypt: First ever EGP sukuk issuance coming this month. According to government sources, the Egyptian government is preparing to issue its first EGP-denominated sukuk (scheduled for 28 October). The issuance size is expected to be EGP3 billion ($63 million) with a tenor of three years. This debut issuance is part of a wider sukuk program worth EGP50 billion, which is double the original target for FY25/26. The Ministry of Finance (MoF) is also holding meetings with 15 banks to explore expanding the program to EGP200 billion by next June, underscoring the government’s commitment to diversifying its funding base. The sukuk will be backed by the Ras Shukeir project, announced earlier this year in partnership with a Gulf sovereign wealth fund, the proceeds from which are earmarked for debt reduction. In parallel, the MoF is set to publish its updated medium-term debt strategy, aiming for a reduction in public debt to below 75% of GDP within three years (down from 85% in the last fiscal year), while cutting debt servicing costs to 7% of GDP and extending the average maturity to five years.