Market Report.
🇺🇸 President Trump is considering “terminating business with China having to do with Cooking Oil” in retaliation for Beijing refusing to buy U.S. soybeans. Trump accused China of committing an “Economically Hostile Act” by “purposefully not buying our Soybeans, and causing difficulty for our Soybean Farmers.” Trump’s social media post sparked an immediate drop in the S&P 500 stock index.
🇨🇳 China has been the top buyer of U.S. soybeans, importing 27 million metric tons valued at nearly $12.8 billion in 2024. But Beijing has not bought a single American soybean since May.
🔋 In the case of China’s rare earth elements, US Treasury Secretary Scott Bessent now anticipates Indian cooperation, even though Trump placed tariffs on them a few weeks ago and threatened to coerce India into ceasing to purchase oil from Russia.
🏦 Federal Reserve Chair Jerome Powell suggested the Fed is nearing the point where it will stop reducing the size of its bond holdings, or “quantitative tightening.” He said the Fed may approach this point in the coming months.
📉 On interest rates, Powell indicated that more rate cuts are likely, as the central bank seeks to balance the risks between employment and inflation. He said the labor market has “softened pretty considerably.” But to date, the federal offices supplying the statistical data remain closed, so that we do not yet know the employment data for September.
💰 Powell defended the Fed’s practice of paying interest on bank reserves, saying eliminating this would hinder the central bank’s ability to control interest rates. On the broader economy, Powell noted that while growth may be on a “firmer trajectory” than expected, the downside risks to employment appear to have risen.
📉 Deflationary pressures persisted in China in September, with both consumer and producer prices falling. China’s producer prices (PPI) fell 2.3% year-on-year in September, narrowing from a 2.9% drop in August. This was the smallest decline in 7 months. Consumer prices (CPI) dipped 0.3% last month from a year earlier, less than a 0.4% fall in August.
🎉 The combination of the Mid-Autumn festival and National Day holiday failed to boost consumer spending, as cautious consumers remained wary amid a weak job market and property sector downturn.
🏦 The central bank is expected to ease monetary policy further, potentially in November, to support the economy as trade tensions with the US linger. Major stimulus measures could also risk overheating the stock market, as seen in the 2015 crash.
🇪🇺 According to Francois Villeroy de Galhau, a member of the European Central Bank’s Governing Council, the ECB is more likely to lower interest rates than raise them as its next policy move.
📉 While the ECB’s monetary policy is currently in a good place, Villeroy said the situation can change, and “if there is a next move, a rate cut is more plausible, more likely than a rate hike.” The article notes that recent economic data, including a protracted slump in Germany’s manufacturing sector and political turmoil in France, have contributed to the downside risks.
🔄 However, other ECB policymakers like Spain’s Jose Luis Escriva and Latvia’s Martins Kazaks have said there is currently no bias toward reducing borrowing costs, and the ECB could equally end up hiking rates. ECB President Christine Lagarde has also said she would “never say” rate cuts are over, despite describing risks to economic expansion as more balanced and those for inflation as “fairly balanced.”
💱 The euro zone currently has a benchmark interest rate of 2.15% with an inflation reading of 2.20%. This leaves real interest rates negative with yields of -0.05%. The euro could experience capital outflows if this situation persists or becomes worse.
📊 The International Monetary Fund (IMF) has advised the Bank of England to be “very cautious” about future interest rate cuts, as British inflation is forecast to remain the highest in the G7 this year and next. The IMF has forecast UK inflation to average 3.4% this year and 2.5% next year, the highest in the G7 group of advanced economies. They believe there are upside risks to the UK inflation forecasts, as businesses’ and households’ inflation expectations have been rising and wage growth remains high.
📈 While the IMF has slightly upgraded its forecast for UK economic growth in 2025, it has also revised down the 2026 projection, leaving the UK as the third-fastest growing G7 economy that year. BoE Governor Andrew Bailey has said he expects further rate cuts, but the timing and magnitude will depend on inflation pressures, which he believes are starting to ease based on recent labor market data.
💻 ASML Holding NV, the Dutch semiconductor equipment maker, reported orders that beat analyst expectations in the third quarter. This was driven by strong demand for ASML’s chip-making machines, particularly those used to produce advanced AI chips.
⚙️ ASML is the only company that makes the extreme ultraviolet lithography machines needed to manufacture the most sophisticated AI chips. This has made the company a major beneficiary of the boom in AI-related investments, with companies like OpenAI striking deals worth over $1 trillion.
📈 ASML’s major clients, including TSMC and Samsung, have reported robust demand for AI chips, further fueling the company’s growth. ASML is targeting annual revenue of up to €60 billion by 2030, nearly double its 2022 revenue of €28.3 billion, as it looks to capitalize on the AI boom in the coming years.
🌏 However, ASML’s strategic importance has also made it a target of geopolitical tensions, with the company facing restrictions on sales to China and calls for tighter controls from a US House committee. The company is also bracing for potential disruptions due to China’s recent restrictions on rare earth exports, which could impact its supply chain.
⚔️ Geopolitics:
🚀 Trump announced a potential escalation of military actions against Gaza, stating, “If Hamas does not disarm, we will disarm them and it’ll happen quickly and perhaps violently. But they will disarm, do you understand me?! This statement underscores his firm stance on the issue and signals a willingness to take decisive action if necessary.
📰 A journalist directly questioned the EU chief spokesperson about whether, given the EU’s position that Russia should pay reparations for the reconstruction of Ukraine, Israel should also be held responsible for the reconstruction of Gaza. In response, the EU chief spokesperson stated, “I have no comment at this stage”.
📄 According to a report by the Anadolu Agency, US Congresswoman Anna Paulina Luna announced that the Russian ambassador to the United States will hand over a 350-page document containing the findings of the Russian government on the assassination of President John F. Kennedy.
📊 Market View.
📉 S&P 500 futures experienced a nearly 2% drop yesterday due to renewed trade tensions between the United States and China. However, prices have recovered, with contracts currently above 6,700 points. A similar situation applies to Nasdaq 100 futures, which are currently trading at 24,900 points.
💵 The dollar index is losing strength, retreating below 99 points and currently trading at 98.77 points. This is accompanied by a rise in pairs like EUR/USD, which has recovered to 1.16, currently at 1.1635.
🇪🇺 In Europe, DAX 40 futures also declined yesterday, and their rebound is weaker, currently at 24,438 points. Eurostoxx 50 futures show slightly more optimism, rebounding to 5,627 points.
🛢️ The trade war is also impacting crude oil, with Brent crude falling yesterday and stabilising around $62.40 per barrel currently.
💰 Gold futures are once again setting historical records, surpassing $4,200, indicating that underlying tensions in global markets remain active despite attempts by Donald Trump to reassure.
💻 Bitcoin is weakening again and has not managed to recover the prices reached over the weekend, currently trading at $112,460.
