Market Report.
I know I always say the same thing, but believe me when I tell you today’s news is shocking.
🇺🇸 The Trump administration plans to set price floors across a range of industries to combat market manipulation by China, according to Treasury Secretary Scott Bessent. China has been able to drive out foreign competitors in the rare earth industry by using its global dominance in refining and processing to slash prices. Bessent says the U.S. needs to exercise “industrial policy” to address this.
📈 The policy may artificially set a “profitable” price for domestic producers above the market price established by China, stimulating domestic production, and probably subsidizing the price impact on demand.
🏭 The administration will set price floors not just in rare earths but across multiple industries. The U.S. also needs to set up a strategic mineral reserve, and JPMorgan Chase has expressed interest in working with the administration on this. The Trump administration has been working to build up a domestic rare earth supply chain.
⚠️ Bessent also had harsh words for China in front of the cameras: “We want to help China, not harm it. If some in the Chinese government wish to slow down the global economy through disappointing actions and economic coercion, the Chinese economy will be the most affected. There is no doubt about it; this is China against the world. China has a command and control economy, and we will not be ordered or controlled. They have a state-run economy, and we will not allow a group of bureaucrats in Beijing to control global supply chains.”
♟️ US moves its strategic pieces against China. U.S. Treasury Secretary Scott Bessent indicated the U.S. would seek wider support beyond the G7. Finance chiefs from the Group of Seven (G7) industrial nations will consider a joint response to discourage China’s planned move to control the global supply of rare earths. German Finance Minister Lars Klingbeil said the G7 gathering will include a discussion of a common approach to address China’s actions with targeted measures, while cautioning against taking any steps that backfire on their economies.
🛢️ The Times of India and UNN (Ukrainian National News) reported that 85 U.S. senators were prepared to grant President Donald Trump authority to impose tariffs of up to 500% on Chinese imports because of China’s continued purchase of Russian oil, and that these measures are linked to expectations of European do the same.
🏦 Bank of America and Morgan Stanley reported impressive second-quarter earnings that significantly exceeded analyst expectations. They joined other major U.S. banks, including JPMorgan Chase and Goldman Sachs, in experiencing a standout quarter, fueled by strong deal-making activity and record highs in the stock market.
💰 A consortium of investors including Nvidia, Microsoft, BlackRock, and Elon Musk’s xAI have agreed to purchase Aligned Data Centers for $40 billion, in what will be the largest global data center deal to date. The consortium includes MGX of Abu Dhabi, BlackRock’s Global Infrastructure Partners, and members of the Artificial Intelligence Infrastructure Partnership (AIP), which was created in September 2024 by BlackRock, MGX, Microsoft, and Nvidia to accelerate investment in AI infrastructure.
🤖 BlackRock CEO Larry Fink, who is also the Chairman of AIP, stated that this investment in Aligned Data Centers will further the group’s goal of delivering the infrastructure necessary to power the future of AI.
📊 A very interesting chart shared by Reuters and published by LSEG seems to indicate the future of AI. Investment in AI by top companies is driving SP500 CapEx above share repurchases or dividend programmes. Everything seems to indicate that this is a long-distance race and a strong bet on the future of this sector. The good news is that the US tech sector appears to be training hard to build muscle in the coming years. The bad news is that job losses due to AI will be an evident reality in the near future.
🇩🇪 Germany: An indicator of the Macroeconomic Policy Institute (IMK) at the Hans Boeckler Foundation, aggregating recent key economic data, shows a 34.8% recession probability — not indicating acute contraction risk. German exports unexpectedly fell in August due to weak U.S. demand. Industrial output had its largest drop in over three years; industrial orders declined for a fourth consecutive month in August.
📉 The International Monetary Fund (IMF) has advised that the British government should not reduce the frequency of its twice-yearly economic forecasts, but a related assessment of the government’s compliance against budget rules should only take place once a year.
🇬🇧 The British government’s Office for Budget Responsibility currently produces twice-yearly economic and budget forecasts, but there had been some speculation that Finance Minister Rachel Reeves wanted to reduce them to once a year, to align with her annual budget.
📑 The IMF’s fiscal affairs chief, Vitor Gaspar, stated that “The evaluation of compliance with fiscal rules should be annual. … Forecasting should take place twice a year in accordance with international best practice.” The IMF broadly backs Britain’s budget policy, but another IMF official, Athanasios Vamvakidis, said UK-specific worries have played a role in pushing up British bond yields more than those of other countries, citing factors like low productivity and sticky inflation.
💷 However, as we have already explained in our reports, the overheating of British bond yields was due, at least in part, to an overselling of bonds by the BoE amounting to £100 billion.
📌 Chancellor of the Exchequer Rachel Reeves needs to raise her fiscal buffer fivefold to have a better-than-even chance of avoiding more tax rises and spending cuts in the coming years, according to the Institute for Fiscal Studies (IFS). Reeves may need to find as much as £22 billion ($29.4 billion) at the budget next month just to restore the razor-thin £9.9 billion margin she had in March.
📉 According with Bloomberg, restoring that headroom would still only give Reeves a one-in-three chance of meeting her pledge to balance day-to-day spending and revenue by the end of the decade. A margin of 1.4% of GDP, almost £50 billion, would be needed to put the odds above 50-50.
📊 The analysis underlines the scale of the challenge facing Reeves as she prepares for the November 26th budget, with businesses and consumers bracing for further pain.
🏆 The gold rally has outpaced equities, with prices up over 50% so far this year, driven by global trade uncertainties, Federal Reserve policy debates, and fiscal instability in the US. The collapse in the relationship between US inflation-linked bond yields (TIPS) and gold prices also supports the idea that geopolitical factors, rather than just inflation, are driving the gold rally.
📉 Deutsche Bank noted that the current 29-day gold rally episode is longer than the average of 19 days seen over the past three years, suggesting the trend may be losing momentum.
🌍 Geopolitics.
⚔️ Trump announced that the U.S. is preparing for a potential new conflict, signaling an attack on Venezuela. He stated, “We are certainly looking at Venezuelan land now. We have the sea under control.”
🕵️♂️ The New York Times reports that Trump has secretly authorized the CIA to carry out covert actions, including lethal operations, targeting the Venezuelan government under Nicolás Maduro.
🇵🇱 As Poland announced a few days ago, now is Italy stops extradition of Ukrainian Nord Stream suspect to Germany. Why don’t Italy and Poland want to cooperate with Germany in clarifying the case of the Nord Stream II explosion, which is Russian-German owned?
📉 Market View.
📊 US futures remain stable but are trading below the highs reached last week. However, tensions between the United States and China continue to escalate, so we recommend carefully reading the news section of our report today. SP500 futures remain above 6,700 points, and Nasdaq 100 futures are holding above 25,000 points.
💵 The DXY dollar index has lost the support level of 98.80 points, although it is currently attempting a recovery, trading at 98.65 points. This has given a boost to EUR/USD, which is now trading above 1.1645.
🇪🇺 In Europe, DAX 40 futures seem to be losing support and are currently down to 24,230 points. EuroStoxx 50 futures are also retreating but remain above 5,600 points for now.
🛢️ Crude oil remains static, possibly due to the uncertainty between China and the United States, with Brent crude spot prices at $62.45.
🥇 Gold futures continue to soar amidst trade tensions, having surpassed $4,250 in recent hours.
💻 Bitcoin remains static around the $111,000 mark, trying to establish support while awaiting further movements.
