Fed Rate Cut and Easing Trade Tensions Between US and China

In the week gone by, the global stock markets delivered a mixed performance, with Japan emerging as the standout winner while the U.S. and Europe posted modest gains and China saw early enthusiasm fade. U.S. indices advanced, fueled initially by optimism over a U.S.-China trade truce.

In this blog, we’ll know in detail what happened last week (October 27, 2025 to October 31, 2025) all across the globe.

Fed Cuts Rate by 25 Basis Points

The optimism of the Federal Reserve’s double-easing move was overshadowed by Chair Powell’s hawkish tone that dimmed hopes for a December easing.

In its meeting, the Fed cut the federal funds rate by 25 bps to 3.75-4% and announced it will end balance-sheet runoff on December 1, halting the ~$60 billion/month drain of liquidity from maturing Treasuries and MBS and resuming reinvestment to stabilize reserves.

US New Stance with Japan and China

Europe remained largely flat, amid the European Central Bank’s decision to hold rates steady and softer-than-expected eurozone GDP data. Japan, by contrast, surged to new heights, propelled by a weakening yen that supercharged exporters and tech giants, alongside momentum from the global AI boom and supportive signals from the Bank of Japan.

The surge was also supported by renewed optimism surrounding U.S.-Japan trade relations. In China, initial excitement from the Trump-Xi trade truce pushed the market up, briefly to decade highs, but profit-taking erased most gains.

The deal saw the U.S. reducing tariffs on Chinese fentanyl-related imports to 10% from 20%, bringing overall tariffs on Chinese goods down to 47% from 57%. In return, Beijing pledged to curb fentanyl flows into the U.S. and increase purchases of American soybeans and other agricultural products. China also postponed new restrictions on rare earth exports by a year.

Quarterly Results and Hope for US-India Deal

Back at home, the Indian stock market started the week on a positive note, supported by upbeat quarterly earnings from several companies, including Nifty 50 constituents. Sentiment was further boosted by easing U.S.-China trade tensions and optimism over a potential trade deal between India and the U.S.

The metal shares advanced on renewed optimism following China’s steel output curbs and progress in US-China trade talks. PSU banks outperformed on reports that India may raise the FDI cap in the sector.

However, it closed flat to marginally negative, amid volatility driven by profit booking near record highs and weak global sentiment after the U.S. Federal Reserve cut interest rates as expected but hinted that it could be the last reduction for 2025.

On the data front, India’s foreign exchange reserves rose by $4.496 billion to $702.28 billion for the week ending 17 October, mainly driven by an increase in the value of gold reserves.

Future Outlook

Going forward, the market is likely to consolidate near recent highs amid FII outflows and domestic resilience, supported by rising reserves, hopes for a 25 bps RBI rate cut in December, and US-India trade progress.

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Reference:
SMC Global Securities’ Research Team

Author: All Content is verified by SMC Global Securities.