Markets claw back amid looping narratives

By Mike Dolan

-What matters in U.S. and global markets today

By Mike Dolan, Editor-At-Large, Finance and Markets

The stories driving markets appear to be moving in loops faster than investors can make significant adjustments, with Friday’s dramatic China trade threats seemingly reversed by Sunday and the French Prime Minister who resigned last Monday now reappointed and forming another cabinet.

Wall Street plummeted almost 3% and gold surged again on Friday after President Donald Trump lambasted China’s latest rare earth export curbs and vowed to slap 100% tariffs on Beijing, sending the S&P 500 to its worst weekly loss since May. However, futures regained about half of that daily percentage loss before Monday’s bell after Trump on Sunday appeared to row back on the move saying, “Highly respected President Xi just had a bad moment. The U.S.A. wants to help China, not hurt it.”

Trade Representative Jamison Greer said tensions rose after Washington reached out to China for a phone call following last week’s announcement of expanded rare earths export curbs, only for Beijing to defer. What’s not clear is what the latest spat means for rolling over the existing bilateral trade deal on November 10 or whether an expected Trump-Xi summit will now take place.

Meantime, China said export growth bounced back more than forecast in September while it rekindled lost U.S. trade elsewhere. Exports to the U.S. fell by 27% year-on-year but shipments bound for the European Union, Southeast Asia and Africa grew by 14%, 16% and 56% respectively.

The full fallout from the weekend’s whiplash will be difficult to parse with the U.S. government still in shutdown, the Columbus Day holiday closing the Treasury market and stock markets bracing for the onset of the U.S. corporate earnings season from tomorrow. Two and 10-year Treasury yields plunged to their lowest in almost a month on Friday’s jolt and the dollar recoiled – but the latter has regained some ground on Monday.

With the IMF/World Bank meetings taking place in Washington this week and a closely watched appearance from Federal Reserve chief Jerome Powell due on Tuesday, there was continued warnings about overextended market valuations and the risks of a sharp correction. “Valuations could now be at odds with the uncertain economic and geopolitical outlook, leaving markets susceptible to a disorderly adjustment,” Financial Stability Board Chair Andrew Bailey told G20 ministers in a letter.

* After Friday’s tech-led slump, Asia opened lower butstabilized as Wall Street futures rebounded and hopes flickeredfor a tariff truce extension, even as Beijing defended rareearth export curbs. The dollar firmed against the yen and francafter Friday’s safety rush, while bullion set another recordabove $4,070 as investors hedged policy and geopolitical risk.The near-term risk skew for AI, EV and defense supply chainsremains sensitive to any tit-for-tat escalation. * Political anxiety in Europe eased somewhat as French PrimeMinister Sébastien Lecornu was reappointed by President EmmanuelMacron and is now about to appoint a new cabinet, keeping RolandLescure at finance and underscoring policy continuity despite adivided parliament and a tricky 2026 budget path. Europeanequity benchmarks steadied after Friday’s selloff, with futuresand cash markets edging higher to start the week. * Earnings season kicks off Tuesday with JPMorgan, GoldmanSachs, Citigroup and Wells Fargo, and the market wants proofthat roughly 8.8% y/y S&P 500 EPS growth can support stretchedmultiples. JPM and Wells are slated to release results around7:00 AM ET (calls at 8:30 AM and 10:00 AM), Goldman at 7:30 AM(call 9:30 AM), and Citi at 8:00 AM (call 11:00 AM).

In today’s column, I discuss how “juiced-out” bonds may be pushing money elsewhere.

Today’s Market Minute

* The last surviving Israeli hostages began to be releasedon Monday as part of a ceasefire deal pushed by U.S. PresidentDonald Trump, who landed in Israel to address the parliament. * U.S. companies and consumers are bearing the brunt of thecountry’s new import tariffs, early indications show,contradicting assertions by President Donald Trump andcomplicating the Federal Reserve’s fight against inflation. * The French presidency announced Prime Minister SebastienLecornu’s new cabinet line-up on Sunday, with most top jobsremaining unchanged at a time when opponents are demanding apolitical shift to win their support for urgent budget talks. * The recent surge in suspected Russian “hybrid warfare”incidents across Europe has put governments on high alert,writes ROI energy columnist Ron Bousso, raising questions aboutthe vulnerability of the region’s energy infrastructure as thecontinent enters the critical winter heating season. * Is China’s stockpiling of crude oil bearish or bullish forprices? Unfortunately, writes ROI columnist Clyde Russell, thereis no clear cut answer to the question.

Chart of the day

Trade Representative Jamison Greer said on Sunday that the U.S. reached out to China for a phone call following an announcement that it was expanding its rare earths export controls but Beijing deferred, while China accused the U.S. of what it called “double standards.” China’s choke on rare earths and magnets, where its near-monopoly position gives it significant leverage in the trade war, could paralyse global supply chains in industries from autos to green energy and aircraft.

Today’s events to watch

* World financial leaders gather for the IMF-World Bank Annual Meetings, speakers on Monday include European Central Bank President Christine Lagarde

* Philadelphia Federal Reserve President Anna Paulson speaks; Bank of England policymakers Catherine Mann and Megan Greene speak

* US corporate earnings: Fastenal

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(By Mike Dolan; Editing by)