Top stories for the morning: Asia rises, US pressures on China and India, Europe loses confidence

Asian indices rose in anticipation of political changes in Japan and in hope for the recovery of the Chinese economy, while in Europe the mood worsened after the unexpected downgrade of France's rating by S&P. These and other topics are covered in our review of key events for the morning of October 20.

Asian markets started the week with strong gains after a successful series on Wall Street and easing concerns about the banking sector and the trade war with China. Japan's Nikkei 225 jumped 3%, breaking a record after the Liberal Democratic Party formed a new coalition, securing the support of Sanae Takaichi: she is likely to become the country's first female prime minister, AP reports. She is expected to continue her policy of low interest rates and active government spending.

China's economy posted a 4.8% annualized growth rate, the slowest pace in a year, despite robust exports. A meeting of the Communist Party leadership kicked off in Beijing, which will set economic goals for the next five years and personnel reshuffles. The Hang Seng Index rose 2.6 percent, the Shanghai Composite gained 1 percent and South Korea's Kospi rose 1.7 percent, hitting a new high on demand for chips and hopes of a trade deal with the U.S.

S&P Global Ratings unexpectedly downgraded France's sovereign rating from AA- to A+, which caused a drop in French bond futures and increased anxiety about the sustainability of the country's public finances, Bloomberg reports. This is the second downgrade in just over a month - Fitch also cut its assessment in September, and Moody's is preparing its own decision this week. According to analysts, the loss of the double "A" may lead to forced sales of securities by some funds committed to hold assets only with high ratings.

Economists attribute S&P's decision to the political crisis and the suspension of President Macron's pension reform, which Prime Minister Sebastien Lecornu insisted on in order to stay in power. While the move helped avoid new elections, it made fiscal consolidation more difficult. The yield gap between French and German ten-year bonds widened to nearly 90 basis points in October, reflecting growing risks.

The downgrade "undermines confidence in the core of a region that already desperately needs deeper structural reforms" and could increase borrowing costs, said Mohamed El-Erian, former head of Pacific Investment Management. Although French securities remain investment grade, their appeal to conservative investors - central banks and pension funds - will diminish. The markets' attention is now focused on the 2026 budget negotiations and a possible Moody's rating revision on Friday, Bloomberg writes.

US President Donald Trump said that the main issues for Washington in relations with Beijing remain rare earth metals, fentanyl and soybean purchases, Bloomberg reports. "I don't want them to play the rare earth elements game with us," Trump emphasized, adding that China should stop exporting fentanyl and resume purchases of U.S. soybeans. The statements came amid the impending end of a temporary trade truce between the two countries.

U.S.-China talks are scheduled for this week in Malaysia following an online meeting between Treasury Secretary Scott Bessent and Vice Premier He Lifeng. Relations between Washington and Beijing escalated again after the U.S. announced new duties and expanded technology restrictions, and China responded by controlling exports of rare earth metals and other strategic materials.

Despite the threat of 100 percent duties, Trump said in an interview with Fox News that such measures are "unsustainable" but "possible." He noted that he expects to meet with Chinese President Xi Jinping at the APEC summit in South Korea. "We will get along well with China, but the deal must be fair," the US President emphasized.

India has announced significant progress in trade talks with the U.S. aimed at reaching an agreement and reducing increased duties, Bloomberg writes. According to Indian officials, the sides have ironed out differences and now there are "no major contradictions" between them. A delegation from New Delhi held "positive meetings" in Washington last week.

US President Donald Trump, who had earlier criticized India for buying Russian oil and imposing 50% duties, toned down his rhetoric and spoke to Prime Minister Narendra Modi twice. Trump said India would "phase out" purchases from Russia, and added that Modi had personally assured him of this. New Delhi has not publicly denied these words, noting only that India's energy policy will take into account the interests of consumers.

Since the outbreak of the war in Ukraine, India has become one of the largest buyers of Russian oil, which now accounts for about a third of its imports. However, Indian refineries have already announced plans to cut purchases, and authorities are considering increasing U.S. oil supplies. Trump, for his part, has threatened to maintain "huge tariffs" if New Delhi fails to fulfill promises on energy policy.

- Japan's broad Topix index rose by 2.2%. Benchmark Nikkei 225 - by 3%.

- In South Korea, the Kospi index was up 1.7% and the Kosdaq was up 2%.

- Australia's S&P/ASX 200 was up 0.4 percent.

- Nasdaq 100 futures were up 0.5 percent, the S&P 500 was up 0.4 percent and the Dow Jones Industrial Average was up 0.3 percent.

This article was AI-translated and verified by a human editor