News of the week summary - 26/10/2025

Argentinian markets rebound after Milei succeeds in midterms elections

Argentine President Javier Milei’s libertarian party, La Libertad Avanza, scored a commanding win in midterm elections, securing about 41 per cent of the vote against 32 per cent for the Peronist opposition. The result strengthens Milei’s political footing at a moment when investor confidence in his free-market overhaul had been faltering. In Argentina’s lower house, his party captured 64 of 127 seats up for election, leaving it short of an outright majority but significantly expanding its influence.

Markets reacted immediately. Prices of Argentina’s dollar-denominated bonds jumped, a sign that investors view the outcome as reducing the risk of political paralysis. The peso also rebounded more than 8 per cent on crypto-based exchanges, reversing recent declines. In finance, when investors describe a “risk-on” moment, they mean markets are showing a greater appetite for taking risk—typically by buying assets that had previously been considered too unstable or uncertain. That is precisely what happened after Milei’s win.

The election restores some credibility to Milei’s ambitious reform plan, which seeks to shrink the state, deregulate markets, and stabilize inflation that still runs among the highest in the world. The government had recently faced a currency sell-off after doubts about its ability to pass key measures, such as changes to labor and tax rules. Although Milei’s bloc still lacks a majority in Congress, the stronger mandate gives him leverage to negotiate with centrist parties.

The vote also has a geopolitical dimension. Washington has extended up to $40 billion in financial support, seeing Milei as a partner aligned with U.S. efforts to counter Chinese influence in Latin America. That backing has helped Argentina defend its currency in recent weeks. For now, the combination of political stability and external financial assistance has given markets a rare dose of optimism. Yet sustaining that confidence will depend on Milei’s capacity to turn electoral momentum into durable economic reform.


US and Chinese officials agree to ease trade tensions

Senior US and Chinese officials said they reached a broad understanding to ease recent trade frictions, though without confirming concrete steps. The agreement, reached after talks in Kuala Lumpur between US Treasury Secretary Scott Bessent and Chinese Vice-Premier He Lifeng, may include a suspension of the tariff hikes both countries were set to impose in early November. Those measures would have sharply raised duties on each other’s imports by 24 percentage points, deepening a trade confrontation that has already hurt exporters and disrupted agricultural flows.

For now, both sides are signaling a willingness to halt escalation. China’s statement hinted at a possible revival of agricultural purchases, particularly soybeans, which Beijing stopped buying from the United States during the dispute. That boycott hit American farming states hard, since soybeans are one of the country’s top agricultural exports. If resumed, those purchases could offer relief to US farmers and help stabilize global commodity prices.

The talks also covered sensitive areas such as port fees, export controls, and cooperation on law enforcement and fentanyl regulation. These topics underscore that the disagreement extends beyond tariffs to questions of trade access, industrial policy, and national security. Bessent described the discussions as “constructive and far-reaching,” and said they laid the groundwork for a potential meeting between Presidents Trump and Xi Jinping later in the week to finalize a broader framework.

Financial markets tend to respond positively when major economies step back from confrontation. If tariff increases are delayed or rolled back, global investors would likely interpret it as a sign that trade flows will remain steady, improving growth prospects and reducing inflationary pressures. Still, the absence of specific commitments suggests that the current détente may be temporary. Both governments must now navigate domestic approval processes and competing political interests before a durable agreement can emerge.

Russian oil importers reconsider buying after US sanctions Rosneft and Lukoil

Refineries in India and China, the two largest buyers of Russian crude, are reconsidering their imports after the United States announced sweeping new sanctions on Moscow. The measures target major Russian oil companies Rosneft and Lukoil and aim to tighten the financial pressure on President Vladimir Putin by cutting the flow of oil revenues that fund his war in Ukraine. The decision, unveiled by President Donald Trump, caused oil prices to surge more than five per cent as traders anticipated increased demand for non-Russian crude.

India’s Reliance Industries, the world’s largest refinery operator, said it would “recalibrate” purchases of Russian oil. People familiar with its position said the company was unlikely to risk violating US sanctions that could block its access to dollar financing. Similar caution was evident in China, where state-backed refiners reportedly paused most new orders for Russian crude at the government’s request. Since the start of the war, India and China have together absorbed roughly 80 per cent of Russia’s oil exports, allowing Moscow to keep revenue flowing despite Western embargoes. Any lasting pullback from these markets could significantly weaken Russia’s fiscal position, since oil and gas make up about a quarter of its federal budget.

The sanctions impose restrictions not only on Russian entities but also on foreign institutions dealing with them, known as “secondary sanctions.” This means banks or companies outside the United States could themselves face penalties if they continue trading with Russian oil producers. For firms such as Reliance, which operate globally and rely on access to the dollar system, such risks are difficult to ignore. 

The fallout is being felt beyond Asia. In Germany, where Rosneft still holds stakes in three refineries under state administration, officials are negotiating with Washington to exempt these assets from sanctions. Berlin argues that the facilities are legally separated from their Russian parent company and vital for Germany’s energy security. One of them, the PCK refinery in Schwedt, processes more than 12 per cent of the country’s crude and remains a major employer in the economically fragile region of Brandenburg.

If Indian and Chinese refiners scale back purchases, Russia will struggle to redirect its oil quickly, tightening global supply and driving up prices. Opec producers could step in to fill part of the gap, but for now there is no formal plan to do so.