Daily Brief Macro: The Heat Is On: News Flow and Sentiment in CHINA / HONG KONG (October 20) and more

• The materials sector continues its outperformance in Hong Kong, however the recent sharp pullback showed a weakening in strength and momentum.
• Mainland investors continued to buy Hong Kong listed stocks heavily during the market pullback earlier this month.
• Zhejiang Sanhua Intelligent Controls (2050 HK) quashed market rumors about a large robotic order from Tesla (TSLA US); however, it continues discussions on cooperation opportunities.

• The longer the US government shutdown continues, the more headwinds accumulate against the dollar and investor conviction remains low.
• Despite near term uncertainty, a dollar bearish outlook is maintained, with a focus on outside the US pro-cyclical growth metrics.
• Developments in US regional banks and escalating US-China trade tensions are key factors affecting global markets, with potential impacts on FX, risk events, and Eurodollar performance.

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• Crude oil futures were again under pressure Friday after the latest selloff in the previous sessions sent prices tumbling to fresh five-month lows, coming amid proposed ceasefire talks in the Russia/Ukraine conflict.
• Front-month Dec25 ICE Brent  futures were trading at  $61.32/b (2055 BST) versus Thursday’s settle of $61.06/b, while Nov25 NYMEX WTI  was at  $57.22/b  against a previous close of $57.46/b.
• Prices had found some support in the previous session after US President Donald Trump said he had received a pledge from Indian Prime Minister Narendra Modi to halt imports of Russian crude oil.

• Malaysia attempts to stick to its fiscal consolidation path, although this comes amid a backdrop of weaker global growth and stickier public spending obligations.   
• The stagnation in development spending, lower revenue-to-GDP ratio, and higher debt service charge burden underline the incomplete nature of fiscal consolidation. 
• While the fiscal targets remain nominally intact, the quality of its consolidation risks slippage in the coming years. Challenges to medium-term sustainability remain unaddressed.

• Global base oils margins rise in response to increasingly lower crude oil prices.
• Mostly-steady outright prices magnify impact of lower crude oil prices.
• Firmer margins and steady outright prices point to stronger-than-usual fundamentals for the time of year.

• US base oils demand could stay cautious amid signs of sufficient availability of supply even with current plant-maintenance work and as regular export cargoes remove surplus volumes.
• Sufficient availability of supply suggests demand is sufficiently weak to balance out current drop in volumes.
• US domestic Group II base oils price-premium to vacuum gasoil (VGO) holds in narrow range so far in Q4 2025, reflecting that dynamic.

• US Group II base oils prices stay in unusually narrow range versus vacuum gasoil feedstock prices throughout most of this year.
• US Group II base oils domestic price-premium to export prices similarly stays in relatively narrow range so far this year.
• US Group II heavy-grade price-discount to prices in markets like India similarly holds in relatively narrow range throughout most of this year.

• Crude oil futures opened the week softer as benchmarks continued to struggle in the face of global trade tensions and a looming supply glut.
• Front-month Dec25 ICE Brent futures were trading at $60.84/b (2012 BST) versus Thursday’s settle of $61.29/b, while Nov25 NYMEX WTI was at $56.86/b against a previous close of $57.54/b.
• Prices continued to bump around five-month lows amid concerns over a recent escalation in the trade conflict between the US and China.

• Asia’s base oils demand could stay more cautious as lower crude oil prices coincide with improving supply of most base oils grades.
• Lower crude prices and rising supply increase concern about exposure to further downward pressure on base oils prices.
• Signs of healthy stocks in all key regional markets give buyers flexibility to hold back until they are comfortable that any price-adjustments have been completed.

• Asia’s Group II base oils prices rise versus gasoil prices to highest in more than a month for heavy grades, highest since Q2 2025 for light grades.
• Rising base oils margins point to firm supply-demand fundamentals, incentivizing refiners to maintain or raise output.
• Incentive to raise output follows rise in base oils exports from Asia’s largest suppliers to thirteen-month high in Sept 2025.