Mission Grey Daily Brief - October 28, 2025
Executive Summary
The past 24 hours have been marked by mounting global economic challenges and deepening geopolitical tensions. China's economy continues to decelerate, with new US and EU tariffs compounding its property sector crisis and undermining the country’s growth model. Meanwhile, the US and EU imposed major new sanctions on Russia’s top oil companies in a bid to pressure Moscow over the Ukraine war, sending global energy markets into short-term volatility. Brazil, facing inflation just above the Central Bank’s target, has seen market projections soften after a diplomatic thaw with the US, although monetary policy remains tight. Across Asia, calls for open trade at the ASEAN summit compete with rising protectionism, as world leaders grapple with policy uncertainties and supply chain disruptions. The coming weeks will be decisive for international businesses as markets look for signals of stabilization or further escalation.
Analysis
China’s Economic Slowdown and Tariff Pressures
China’s third-quarter GDP growth slowed to 4.8%, marking its weakest pace in a year. While annual growth remains nominally near Beijing’s “around 5%” target, the composition of growth is skewed toward exports and high-tech manufacturing, as domestic consumption and real estate continue to drag. Retail sales only rose 3% in September and fixed asset investment excluding real estate fell for the first time since the pandemic, underlining persistent weakness in private sector confidence and household spending. Apartment prices in major cities are down as much as 40% from their 2021 peaks, signaling a deepening property bust that erodes household wealth and spending power. [1][2][3][4][5]
Escalating trade tensions are hitting China externally as well. The US, under the Trump administration, has ramped up tariffs—145% on Chinese goods, with China retaliating at 125%. These moves, set to cut global merchandise trade by at least 0.2% this year, have driven exports to the US down 27% year-on-year in September. While China has succeeded in redirecting some exports to Southeast Asia and Africa (exports to Africa increased 56% year-on-year), this pivot comes at a cost—firms are forced into fierce price competition, reducing profit margins and pressuring wages. [1][2][6]
Policymakers in Beijing are now debating further demand-side stimulus and targeted support, particularly for housing and consumption, as nominal GDP growth remains subdued at 3.7%. Industrial production growth was a rare bright spot, especially in high-tech (up nearly 10%) and equipment manufacturing (+9.7%). But with new US and EU tariffs on the horizon and global supply chains under threat, long-term economic strategy is shifting toward resilience, technological self-sufficiency, and digital expansion. [1][2]
Russian Oil Sanctions and Energy Market Reactions
In a coordinated move, the US and EU introduced full blocking sanctions against Russia’s top oil producers Rosneft and Lukoil, targeting more than 30 subsidiaries. The aim: to cut off revenues funding Russia’s war in Ukraine and force Moscow toward a peace deal. These companies collectively account for roughly 70% of Russian crude exports, or about 3.1 million barrels per day—nearly 6% of global supply. [7][8][9][10][11][12]
While Russian exporters have previously routed oil through “shadow fleets” and pivoted sales to China and India (China imported 109 million tonnes last year; India 88 million tonnes, both record highs), Washington’s new approach leverages secondary sanctions. With these, any global financial institution facilitating Russian oil trade now risks being cut off from the US banking system. Refinery executives in India suggest transactions will be severely impacted, raising costs and pressuring oil buyers to diversify. Initial market reactions saw Brent crude rally almost 4% to $65/barrel and US West Texas Intermediate jump above $60, though analysts expect the rally may be temporary given broader economic headwinds. [7]
The impact on global oil flows will be determined by the willingness of China and India to continue purchasing despite the risk of US financial reprisals. Meanwhile, Europe races to ban Russian LNG and tighten long-running sanctions, fueling uncertainty in energy markets and supply chains. [12][11]
Brazil’s Economic Outlook: Inflation, Rates, and US Relations
Brazil’s central bank just released its latest Boletim Focus bulletin, indicating inflation expectations for 2025 have been revised downward to 4.56%, yet remain slightly above the official target of 4.5%. GDP growth forecasts for 2025 also slipped marginally from 2.17% to 2.16%, with growth seen slowing further into 2026 as global trade and US tariffs weigh on exports. [13][14][15][16][news-search-Focus][17]
The Selic interest rate is holding firm at 15%, with expectations for a gradual reduction to 10% by 2028 as inflation moderates. The Brazilian real is trading near R$5.41 against the dollar, supported by foreign capital flows—though risk remains from fiscal pressures and external trade shocks. [18][19] Recent market optimism reflected the positive tone of a diplomatic meeting between Presidents Lula and Trump at the ASEAN summit, which eased concerns about bilateral tariffs and prompted a drop in government bond yields. [20] However, analysts caution that monetary policy remains tight and could stifle expansion if rates stay high for too long. [21]
From ASEAN to Europe: Calls for Open Trade Clashing with Protectionism
At the ASEAN summit in Malaysia, China’s Premier Li Qiang called for regional leaders to oppose US protectionism and maintain open trade. The rhetoric aligns with China’s effort to reorient trade flows toward Asia, Africa, and Belt and Road partners, but US tariffs continue to dominate discussion. President Trump signed several trade agreements with regional partners but left tariffs unchanged, keeping Canadian and Brazilian leaders engaged in tense negotiations over future arrangements. European diplomats voiced concerns over China’s expanding export controls on critical raw materials—a reminder that the global trade system is being reshaped by competition for strategic commodities and supply chain resilience. [22]
The ASEAN-bloc-led RCEP, a mega trading group covering 30% of global GDP, is being promoted as a buffer against US tariffs and supply chain disruptions, although its effectiveness is not yet clear in the face of persistent protectionism and strategic rivalry.
Conclusions
The current cycle of economic slowdown, trade disputes, and sanctions is straining the old architecture of globalization. China's export pivots and targeted stimulus may temporarily stabilize growth, but long-term sustainability hinges on reform and innovation—both constrained by authoritarian policy choices and persistent property malaise. Russian energy sanctions signal rising costs and volatility for global markets, as the transactional calculus between strategic interests and financial exposure deepens. Brazil, though showing resilience and pragmatic diplomacy, confronts the balancing act of inflation, rates, and trade friction as external conditions shift.
Are we witnessing the dawn of a new era of de-globalization and regionalization, or will diplomatic efforts at upcoming summits yield meaningful de-escalation? For international investors and businesses, the imperative is not just to hedge against risk but to identify which markets offer genuine stability, openness, and transparency in such turbulent times. How will ethical governance, rule of law, and supply chain integrity weigh in the calculus of global business decisions going forward? The next moves by policymakers and multinational enterprises may set the tone for years to come.
Further Reading:
Themes around the World:
Geopolitical Risk and Asset Diversification
Taiwanese investors and companies are actively seeking to diversify away from U.S. exposure due to escalating Sino-U.S. tensions. This de-risking trend includes reducing reliance on American financial institutions and exploring alternative funding sources, highlighting the growing geopolitical risk premium impacting investment strategies and global supply chain resilience.
Trade Tensions and Export Realignment
US-China trade tensions have redirected commodity flows, benefiting Brazilian exporters, particularly in soybeans and iron ore. Brazil is strengthening trade ties with China, expanding exports beyond commodities into manufacturing and technology sectors. However, global tariff uncertainties and protectionist policies pose risks to Brazil's trade-dependent economy.
Currency Depreciation and Financial Stability Risks
Delays in international financial aid and heightened government spending have pressured the Ukrainian hryvnia toward a five-year low. Currency depreciation risks accelerating inflation, increasing import costs, and undermining financial stability, which complicates foreign investment and business operations in Ukraine.
US-China Geopolitical Tensions
Escalating US-China tensions significantly impact Taiwan's investment climate and supply chains. Taiwanese investors and companies are diversifying away from US exposure, seeking alternative funding and manufacturing bases in Southeast Asia and the Middle East. This geopolitical risk drives a gradual economic decoupling, increasing inflationary pressures and complicating global trade dynamics.
US-China Trade Tensions
Escalating trade disputes between the US and China, including tariffs up to 155%, export controls, and retaliatory measures, are creating significant uncertainty. These tensions impact global supply chains, investor sentiment, and corporate earnings, especially in technology, energy, and manufacturing sectors, leading to market volatility and strategic shifts in trade and investment policies.
Industrial Activity and Investment Slowdown
Mexico faces a contraction in industrial output and weak public and private investment, with manufacturing and construction sectors declining in late 2025. This slowdown challenges the government's Plan Mexico economic strategy, threatening job creation and nearshoring benefits. Businesses should anticipate subdued industrial demand and potential delays in infrastructure projects, impacting supply chains and investment returns.
Energy Dependence on Russia and US Pressure
Despite US diplomatic efforts to reduce Turkey's reliance on Russian oil and gas, Turkish refineries remain heavily dependent on Russian crude due to refinery configurations and cost advantages. This energy dependence exposes Turkey to geopolitical risks and potential US sanctions, complicating energy security and international relations.
Challenges to Israeli Arms Industry
The Israeli defense sector, a key economic pillar, confronts headwinds from shifting global attitudes and sanctions linked to the Gaza conflict. While demand remains from some markets, cancellations by European countries and reputational damage threaten export revenues, potentially reducing defense sector growth and innovation in the medium term.
Economic Growth and Fiscal Stimulus
Indonesia's economy is projected to grow around 5% in 2025, with a dip in Q3 followed by a rebound supported by government spending and fiscal stimulus. The government injected Rp200 trillion into banks to improve liquidity, aiming to boost growth to 5.5% in Q4. This fiscal support is critical for sustaining domestic demand and investor confidence amid global uncertainties.
Agribusiness Environmental Scrutiny
Brazil's agribusiness, the largest greenhouse gas emitter and a key economic sector, faces increasing global scrutiny ahead of COP30. Despite efforts to showcase sustainable practices, the sector's role in deforestation and environmental impact poses risks to exports and international trade relations, especially with the EU and US imposing stricter environmental compliance requirements.
Structural Reforms and Regulatory Environment
Comprehensive reforms including foreign exchange liberalization, investment law modernization, and streamlined licensing are improving Egypt's business climate. Enhanced transparency, fiscal discipline, and private sector engagement reduce barriers and attract foreign direct investment, though challenges remain in governance and competition with public and military-owned enterprises.
Positive Domestic Economic Sentiment Boosts Stock Market
Indonesia's stock index (IHSG) shows gains driven by optimistic domestic economic policies, including potential mergers of state-owned asset management entities and steady credit growth. This reflects investor confidence in Indonesia's economic fundamentals despite external uncertainties, supporting capital market development and investment inflows.
Energy Infrastructure Vulnerability
Russian missile and drone strikes have severely damaged Ukraine's energy infrastructure, including gas production facilities, reducing domestic output by over 60%. This disruption threatens Ukraine's energy security, increases dependency on costly imports, and risks spillover effects on European energy markets, especially during winter, complicating regional supply chains and energy pricing.
Shifts in Foreign Investment and Industrial Landscape
Foreign investment in Germany's Mittelstand has surged sixfold over a decade, with growing focus on technology, software, and digital services rather than traditional manufacturing. This trend reflects Germany's role as Europe's economic anchor and gateway to the EU. However, complex ownership structures and data gaps pose challenges for cross-border M&A and investment decisions.
India’s Resilient Economic Fundamentals
India demonstrates strong macroeconomic fundamentals with low inflation, robust bank and corporate balance sheets, ample forex reserves, and credible fiscal and monetary policies. These factors underpin resilience amid global uncertainties, supporting steady growth projections despite external headwinds like protectionism and geopolitical tensions.
Political Instability Impacting Investment
Thailand's ongoing political uncertainty, including upcoming elections and government changes, is causing foreign investors to underweight Thai stocks. Political risks, such as no-confidence motions and border disputes, exacerbate market volatility and dampen investor confidence, potentially delaying structural reforms and affecting long-term economic stability.
Egypt-EU Strategic Economic Partnership
The comprehensive partnership between Egypt and the EU, backed by a €7.4 billion financial package, enhances trade, investment, and cooperation in energy, manufacturing, and infrastructure. The EU remains Egypt’s largest trading partner, reinforcing economic stability and providing access to advanced technologies and markets critical for Egypt’s development goals.
Foreign Investment Outflows from China
Concerns over China's economic policies, geopolitical risks, and growth prospects have led to sustained foreign investor sell-offs in Chinese equities and bonds. This trend reflects apprehension about policy direction and market stability, impacting capital availability and valuation levels for Chinese assets in global portfolios.
Shift Toward a Centrally Managed War Economy
Despite sanctions and conflict-related costs, Russia’s economy exhibits resilience through a deliberate transformation into a centrally managed war economy. State intervention mobilizes idle capacity, stabilizes the ruble via capital controls, and prioritizes military-linked industries. This autarkic model mitigates risks of currency flight, import collapse, and debt crises, sustaining economic activity under geopolitical isolation and redefining Russia’s economic structure amid prolonged conflict.
US-China Trade Tensions and Tariffs
Renewed escalation in US-China trade disputes, including tariffs reaching up to 145% and retaliatory Chinese export controls on rare earths, disrupt supply chains and elevate market volatility. While recent diplomatic efforts offer a fragile truce, the risk of further tariff hikes and export restrictions continues to weigh heavily on global trade dynamics and corporate strategies.
Taiwan's Energy Security Risks
Taiwan's heavy reliance on imported energy, especially LNG (97% by sea), exposes it to significant risks amid Chinese military threats and potential blockades. This vulnerability threatens critical industries like semiconductors, prompting Taiwan and the U.S. to bolster energy storage, reconsider energy mixes, and support LNG shipments to ensure uninterrupted supply and economic stability.
Foreign Investment Trends and Stock Market Dynamics
Foreign net purchases of South Korean stocks have surged, particularly in the semiconductor sector, reflecting optimism about industry prospects. However, foreign investors remain cautious due to geopolitical risks and regulatory uncertainties, influencing capital market volatility and investment strategies.
Fiscal Expansion and Industrial Strategy
Takaichi's administration is expected to pursue aggressive fiscal expansion focused on strategic industries such as semiconductors, defense, and advanced manufacturing. This aligns with a broader industrial revival strategy aimed at enhancing technological sovereignty, supply chain resilience, and Japan's competitive position in global high-value sectors.
Inflation and Economic Outlook
Australia faces higher inflation rates compared to other advanced economies, projected at 3% in 2026, influenced by global trade tensions and domestic energy policy changes. The Reserve Bank may maintain higher interest rates longer, balancing inflation and unemployment risks. This environment affects investment strategies, consumer spending, and business costs, impacting overall economic growth and market stability.
Financial Market Volatility Amid Trade and Policy Uncertainty
The convergence of trade war escalation, government shutdowns, and critical economic data releases has created a volatile environment for global financial markets. Key sectors such as technology, materials, and industrials face heightened scrutiny, with earnings reports and Federal Reserve policy decisions closely watched for signals on economic resilience and inflationary pressures.
Manufacturing Sector Stability
Vietnam's manufacturing PMI remained steady at 50.4 in September 2025, indicating sustained sector health. Despite muted international demand and inflationary pressures, production and new orders are growing modestly. The sector faces challenges from input cost inflation and supply chain disruptions but benefits from supportive public investment and stable economic policies.
Improving International Investment Position
Turkey's overseas financial assets increased by 2.2% to $386.9 billion, while liabilities rose by 3.4% to $728.6 billion, resulting in a net international investment position deficit of $341.7 billion. The growth in foreign currency reserves and direct investments reflects moderate external wealth improvement, but the persistent deficit underscores ongoing external vulnerabilities affecting economic resilience.
IMF Pressure to Devalue Ukrainian Hryvnia
The IMF urges Ukraine to devalue its currency to increase local currency revenues and alleviate budgetary pressures amid war financing needs. However, concerns about inflation and social unrest persist. This financial strategy impacts Ukraine's macroeconomic stability, investor perceptions, and the broader economic environment for business operations.
Mega-Project Delays and Challenges
Key infrastructure projects, including NEOM and The Line, face uneven progress due to engineering complexities, funding shortfalls, and lower oil prices. Delays in delivery and construction challenge Vision 2030 timelines, with private sector investment lagging, raising concerns over the feasibility and sustainability of Saudi Arabia's ambitious economic transformation agenda.
Budget 2026 Uncertainty and Economic Impact
The 2026 budget proposal faces delays and political contention, with lowered deficit reduction targets and contested tax measures. Uncertainty over fiscal policy constrains corporate investment and consumer spending, particularly affecting SMEs. The inability to present a credible budget undermines market confidence and risks further credit rating downgrades, complicating France's fiscal trajectory.
Post-Ceasefire Market Rally
The Gaza ceasefire has boosted investor confidence, driving the Tel Aviv Stock Exchange to record highs with increased capital inflows, a stronger shekel, and lower bond yields. This recovery signals potential growth opportunities in real estate, infrastructure, and technology sectors, though caution remains due to lingering geopolitical uncertainties.
Fiscal Policy Deadlock and Budgetary Risks
The inability to pass austerity budgets due to parliamentary fragmentation risks France entering 2026 without an approved budget, defaulting to a 2025 spending framework. This impedes new expenditures and reform initiatives, prolonging fiscal deficits near 5% of GDP. The European Commission's excessive deficit procedure intensifies pressure, with potential sanctions if fiscal targets are unmet, threatening EU financial stability.
Electronics Industry and Supply Chain Integration
Mexico has become a vital hub in North American electronics manufacturing, with deeply integrated supply chains crossing borders multiple times. Proposed US tariffs on Mexican electronics imports risk disrupting these networks, increasing costs, and undermining nearshoring gains. The industry advocates for policies preserving tariff-free trade and reinforcing Mexico's role in regional manufacturing resilience, essential for competitiveness and investment.
China’s Economic Slowdown
China’s Q3 2025 GDP growth is forecasted at 4.7-4.8%, the lowest in a year, signaling weakening domestic demand, deflationary pressures, and property sector distress. This slowdown threatens global supply chains, commodity markets, and investment flows, prompting cautious fiscal and monetary policy responses from Beijing and raising risks of prolonged global economic fragility.
Ruble Currency Dynamics and Central Bank Policy
The Russian ruble has strengthened against major currencies, supported by central bank interventions and recovering oil prices. However, geopolitical risks and sanctions-induced external pressures persist. The central bank's interest rate decisions, including potential cuts, aim to balance inflation control with stimulating economic growth amid ongoing market volatility.
Stock Market Resilience Amid Conflict
Israel's stock market has shown remarkable growth despite two years of conflict, with the TA-125 index rising 81% since October 2023. Nearly 27% of continuously traded companies doubled their market value, led by defense, insurance, and banking sectors. This resilience signals strong investor confidence and potential for continued gains, influencing foreign investment and capital flows.