Market Report.
📞 On Friday, the U.S. reached out to China for a phone call after China announced it was expanding its rare earths export controls, but China deferred the call, according to U.S. Trade Representative Jamison Greer. Greer called China’s move a “power grab” and said the U.S. was not notified in advance.
💼 In response, President Trump imposed 100% tariffs on China’s U.S.-bound exports and new export controls on critical software, though he also expressed a desire to help China avoid a recession. He further announced, “Also on November 1st, we will impose Export Controls on any and all critical software.” This announcement had a significant impact, wiping out nearly $800 billion from major tech firms, with the S&P 500 and Nasdaq Composite experiencing their largest declines since April.
🇨🇳 China accused the U.S. of “double standards”, citing examples like adding Chinese companies to a trade blacklist and levying port fees on China-linked ships. China defended its rare earths export curbs as driven by concerns over the military applications of these elements amid “frequent military conflicts.”
⚖️ Friday’s events were a response to the new restrictive measures on rare earths that we announced earlier in our report. These measures are seen as an effort by China to leverage its dominance in the rare earths sector to support its own industries and constrain the U.S. military’s capabilities. The restrictions could deepen other countries’ dependence on China’s rare earth expertise and technologies, while giving Beijing more bargaining power in trade negotiations.
🤝 Trump reassured Americans about China, saying: “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want a depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!” posted by Donald Trump on his Truth Social platform yesterday.
🏛️ It is also important not to forget that, the US Supreme Court will hear arguments on tariff’s legality in November 2025, following lower court rulings that found President Trump exceeded his authority by imposing broad “Liberation Day” and reciprocal tariffs under emergency powers (IEEPA). As of now, these tariffs remain in effect due to a judicial stay until at least mid-October, to allow for the Supreme Court appeal.
🌍 China’s exporters are finding ways to diversify their markets and offset the impact of U.S. trade tensions, but the broader economic slowdown remains a concern.
📊 China’s export growth picked up pace in September, rising 8.3% year-on-year, the fastest pace since March and beating market expectations. Imports also grew at a faster 7.4% rate, the quickest pace since April 2024, as Chinese firms tapped into new markets beyond the U.S. The U.S. now accounts for less than 10% of China’s direct exports, down from over $400 billion previously, reducing the potential impact of further U.S. tariffs.
⚓ China also responds to the US with reciprocal port tariffs, further straining the global supply chain between the world’s two largest economies.
🚢 China announced it will start charging U.S. ships for docking at Chinese ports, effective October 14th. This is a direct response to the U.S. imposing similar fees on Chinese vessels arriving at U.S. ports. China will charge 400 yuan ($56) per net ton for U.S. vessels, matching the $50 per net ton that the U.S. is imposing on Chinese ships. The fees will increase over time through April 2028.
🚨 China claims the U.S. fees “seriously violate” international trading principles and “seriously damage” China-U.S. maritime trade. Longer-term, there may be more demand for non-Chinese ships, but the U.S. has limited shipbuilding capacity compared to China’s dominant 53.3% global market share.
📈 Debt markets, with rising bond premiums, remain the focus of attention for larger asset managers.
💰 Investors are demanding higher risk premiums to hold the debt of governments in countries like France and Japan, as political instability and policy uncertainty undermine confidence. Real yields (yields adjusted for inflation) on long-term sovereign bonds in major economies like Germany, France, the UK, and Italy have reached multi-year highs, reflecting rising political risks.
🏛️ The need for governments to sell more debt to fund spending is also contributing to the rise in real yields, as investors demand greater compensation. In the UK, the government’s borrowing costs are the highest among major developed markets as investors brace for the opposition Labour party’s budget proposal in late November.
📉 But as we have already explained in previous reports, the too hard selling of bonds by the BoE, reducing its balance sheet, was the cause of its premium increases, and it has already announced a 30% reduction in its sales volume for the next liquidations.
⚠️ New concerns on the recent turmoil in the US credit markets, particularly the corporate bond and loan sectors. The rapid and severe bond and loan implosions may be a harbinger of a more fragile credit market environment, where investor complacency and lack of scrutiny have left the system vulnerable to shocks. The “excesses” built up in the markets over years of low rates and aggressive risk-taking are now starting to “topple over in extreme scenarios,” potentially signaling a shift in the credit market environment.
🗺️ Geopolitics:
🤝 Palestinian militant group Hamas released the first 7 surviving Israeli hostages, marking the first stage of a ceasefire deal brokered with the help of U.S. President Donald Trump. Another transfer involving 13 surviving hostages and 28 additional captives, including 26 confirmed dead, is expected to follow. As part of the agreement, Israel is also scheduled to free nearly 2,000 Palestinian detainees and prisoners.
🌍 President Trump is set to meet Today, in Egypt with President Abdel Fattah el-Sisi and over 20 world leaders in Sharm el-Sheikh, co-chairing an international summit on peace in Gaza.
🌐 Attendees include figures such as Antonio Guterres (UN), Keir Starmer (UK), Emmanuel Macron (France), Pedro Sánchez (Spain), and Recep Tayyip Erdogan (Turkey), while neither Israel nor Hamas is participating.
📜 The meeting is expected to aim at ratifying the principles of an agreement, ending the war in Gaza, and advancing the reconstruction and security of the area. This could pave the way for agreements in the energy and reconstruction sectors, particularly considering Trump’s son-in-law’s real estate investment plan for Gaza.
💣 President Trump stated, “If Putin doesn’t settle the war, I’m going to send them [Ukraine] Tomahawks.” This declaration emphasizes his stance on the conflict and suggests a willingness to escalate military support for Ukraine if diplomatic efforts fail.
🎯 According to the Financial Times, Trump has been quietly assisting Ukraine in executing long-range drone strikes on Russian energy infrastructure by providing detailed intelligence and target data. The objective is to weaken Russia’s economy and pressure Putin into negotiations. Since midsummer, this coordination has intensified, allowing Ukraine to target major oil refineries and reduce Russia’s fuel output by as much as 20%.
📈 Market View.
📊 US futures are starting to recover some of the losses incurred during Friday’s crash. S&P 500 futures are up to 6,685 points, while Nasdaq 100 futures have risen to 24,835 points.
💵 On Friday, the dollar retraced after several consecutive days of strong gains, having reached 99.50 points on the DXY index, and is currently positioned at 98.95 points. The EUR/USD pair dropped below 1.1550 on Friday, from which it rebounded to the current 1.1615.
📈 In Europe, futures are also trying to regain an upward tone after Friday’s close, with DAX 40 futures trading at 24,485 points and Eurostoxx 50 futures at 5,570 points.
📉 The pessimism on Friday and the crossfire of sanctions between the two largest economies in the world led to a severe drop in crude oil prices. Brent crude fell to around $62 per barrel, from which it is currently recovering to $63.70.
💔 Bitcoin also suffered, losing over 10% since Friday, falling below $110,000 before rebounding to the current $115,325.
🏅 The only asset that did not drop, and was indeed bolstered by the increase in volatility and uncertainty, was, of course, gold. Gold futures have reached nearly $4,100 per ounce at the start of the week, marking another historical high.
