Market report.
🌏 China on Thursday significantly tightened export controls on these essential materials, asserting its dominance in global technology supply chains.
📝 Under the new measures, companies will have to apply for permits in Beijing to export products containing rare earth metals originating from China, but companies with ties to foreign militaries or on export control or watch lists will be denied permits. The new rules bar Chinese citizens from participating in unauthorized rare earth mining and magnet manufacturing activities overseas without approval from Beijing.
⚔️ The measures target the defense sector and aim to prevent the “misuse” of rare earths in military and other sensitive applications, denying export licenses to companies tied to foreign militaries or on control lists. China accounts for about 70% of the world’s supply and has repeatedly used key minerals as a bargaining chip in trade negotiations.
💼 New York Fed President John Williams signaled he would be comfortable with cutting interest rates again, citing concerns about potential further slowdown in the labor market. San Francisco Fed President Mary Daly echoed Williams’ view, saying the softening in the labor market looks “worrisome” and that interest rate cuts are needed to “risk-manage” the situation.
🔍 However, Fed Governor Michael Barr expressed caution about cutting rates, leaning more heavily on the risks of inflation, even as he acknowledged potential vulnerabilities in the labor market.
🗳️ The Fed’s policy committee voted 11-1 last month to cut rates, with the dissent favoring an even bigger rate cut. The minutes show the committee may have been more divided. A majority of the Fed’s 19 policymakers felt at least two more quarter-percentage-point rate cuts would be needed by the end of this year. Financial markets are pricing in a 95% chance of a quarter-point rate cut at the Fed’s October meeting, as the central bank takes its cue from weak labor market data.
🇯🇵 Japan’s wholesale inflation, as measured by the corporate goods price index (CGPI), held steady at 2.7% in September, exceeding market forecasts. Most Japanese households expect prices to keep rising a year from now, suggesting persistent inflationary pressures that could prompt the Bank of Japan (BOJ) to continue raising interest rates.
💰 Persistent inflation would add to the challenges for Japan’s new ruling party chief Sanae Takaichi, who has pledged to curb rising living costs. She also has stressed the need to focus on reflating the economy and cushioning the blow to households from rising living costs.
💱 Former BOJ official Atsushi Takeuchi says Japanese authorities may tolerate moderate yen declines, but could intervene if the currency sharply depreciates towards 160 yen per U.S. dollar. Takeuchi believes the yen could stabilize as the interest rate gap between the U.S. and Japan narrows, with the Fed expected to cut rates and the BOJ eventually raising them.
⚖️ However, if Takaichi gives markets the impression the government would leave sharp yen declines unattended, the currency’s fall may accelerate. Finance Minister Katsunobu Kato has already issued verbal warnings about monitoring excessive, disorderly exchange-rate moves. US won’t welcome accelerated yen declines, and could even welcome Japan’s intervention to combat yen slides.
🇬🇧 In the UK, as in France, they are also looking for formulas to contain their fiscal deficit: The National Institute of Economic and Social Research (NIESR) think tank says UK Finance Minister Rachel Reeves should break her promise not to raise taxes on working people and instead increase income tax. NIESR argues that other options to raise the £30 billion in revenue needed, such as a new tax on wealth or land values, would be too economically damaging.
📜 Reeves and Prime Minister Keir Starmer had pledged before the election not to raise income tax, social security contributions, or the main corporate tax rate on “working people.” However, NIESR says a 1 percentage point increase in the effective income tax rate would be less economically harmful than equivalent increases in other major taxes like VAT.
📉 An increase in VAT would have a more serious short-term impact, reducing personal disposable income by nearly 3% and GDP by almost 1%. While breaking the tax pledge could be politically difficult, NIESR argues it may be necessary given the economic challenges the government is facing, including higher borrowing costs and lower growth forecasts.
🇫🇷 The French economy is expected to maintain steady 0.3% growth in Q3, unchanged from the previous quarter, despite political uncertainty and trade tensions. This is based on the Bank of France’s monthly survey of around 8,500 businesses conducted between September 26 and October 3. Business leaders highlighted concerns about the national political climate and trade tensions, particularly the impact of higher U.S. tariffs on the agri-food and machinery/equipment sectors.
📰 It is also important to note that, the survey was completed before the recent resignation of Prime Minister Sébastien Lecornu.
🌍 Geopolitics:
🚫 Poland refuses to extradite the Ukrainian accused of sabotaging Nord Stream 2: “It does not serve Poland’s interests. From our point of view, the only ones who should be ashamed and silent on the subject of Nord Stream 2 are those who decided to build it.”
🤝 After the attack on Nord Stream II, Radosław Sikorski, former Foreign Minister of Poland and member of the European Parliament, expressed his gratitude with a message saying: “Thank you US.”
🚧 Poland participated in the Baltic Pipe project, a key gas pipeline connecting Norwegian gas fields directly to Poland via Denmark. This project is the main energy corridor between Poland and Norway following the sabotage of Nord Stream II and was designed to reduce Polish dependence on Russian gas.
🛑 President Trump could not guarantee that Israel would not launch another airstrike on Gaza, saying, “The first thing we will do is return the hostages… and then we will see.”
🕊️ President Putin said he was asked by Prime Minister Netanyahu to tell Iran that Israel no longer wants a conflict with Iran. Russia’s TASS news agency quoted Putin as saying that Israel had sent a message to Iran through Putin that it does not want conflict and wants to “resolve the problem.”
🗣️ Trump also said yesterday Spain should be ‘thrown out’ of NATO because they don’t want to pay the 5% from GDP that Trump asked for.
📊 Market View.
📈 US futures remain elevated. Mini S&P 500 futures are stable near 6,800 points, currently trading at 6,785 points. Nasdaq 100 futures are at 25,330 points, close to their historical highs.
💵 The dollar continues to strengthen despite recent favourable comments regarding rate cuts in the United States. The DXY index has reached 99.50 points. Pairs like EUR/USD have dropped below 1.16, currently at 1.1565. GBP/USD has lost the important support level of 1.33, falling to 1.3292. USD/JPY has broken previous highs, rising to levels not seen since February 2025, reaching and surpassing 153 in recent hours, but is currently retreating to 152.60.
🇪🇺 In Europe, DAX 40 futures have reached new historical highs, approaching 24,900 points in recent hours. Eurostoxx 50 futures remain more cautious around 5,645 points, trading sideways.
🛢️ Crude oil has retraced again, with Brent crude returning towards support levels around $65 per barrel, currently trading at $64.90.
💰 Gold retraced during yesterday’s session, losing the $4,000 mark and currently holding around $3,985.
📉 Bitcoin also experienced a setback yesterday, dropping below $120,000, but has since recovered and is currently at $121,465.
