US, Russia, and Ukraine – New sanctions, old stalemate
Last week, the United States tightened sanctions on Russian oil exports, while the delivery of Tomahawk missiles to Ukraine was put on hold. The planned meeting in Budapest between Trump, Putin and Orban was cancelled, underscoring the ongoing stalemate in efforts to resolve the conflict. Discussions over the potential use of frozen Russian assets to support Ukraine are currently on hold amid political debates in Europe. Overall, the new sanctions are unlikely to have a meaningful impact on Russia’s war machinery, which remains resilient. President Trump continues to advocate for an end to the conflict, though no tangible progress has been made so far.
US CPI – Cooling trend holds
Last Friday, the US CPI came in at 0.31% month-on-month, coming in below market expectations. The impact of tariffs on inflation remains limited and has not materially altered the underlying disinflationary trend. Following the release, the US dollar weakened slightly, while Treasury yields initially declined before rebounding. The softer inflation data reinforce market expectations for the Federal Reserve’s policy path and increase confidence in a forthcoming rate cut.
ASEAN Summit – Focus on trade
This week, China and the United States will hold a new round of trade talks in Malaysia ahead of the ASEAN summit, which will also be attended by leaders from Brazil, Japan, and South Africa. Trade relations are expected to be a central theme. With current US tariff measures on China set to expire on November 1st, both sides have a clear incentive to advance negotiations and define a more stable trade framework. However, any setback in the talks could easily unsettle markets.
FED and ECB – Cut and hold
This week, the Federal Reserve is widely expected to cut interest rates by 25 basis points. The dovish shift in recent Fed communications has already been largely priced in by markets, and further monetary easing appears likely in the months ahead. In contrast, the European Central Bank is expected to keep rates unchanged. While economic data remain soft, conditions are not yet weak enough to warrant an immediate policy adjustment.
Algebris Investments’ Global Credit Team
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