China Suspends Rare Earth Export Ban, Opening Door for Tariff Talks with U.S.

China–U.S. Trade War

Economic

Summary:

China has unexpectedly suspended its export ban on rare earths and other dual-use goods for 28 U.S. companies, paving the way for renewed trade negotiations with the United States after both sides agreed to temporarily reduce tariffs...

Rare Earths as Strategic Leverage in Trade Diplomacy

On May 15, China’s Ministry of Commerce announced a 90-day suspension of export restrictions targeting products with both civilian and military applications, including critical rare earth elements. This decision applies to 28 American companies and follows a major breakthrough in Geneva where China and the U.S. agreed to temporarily lower import tariffs—marking a key de-escalation in their prolonged trade conflict.

China has long dominated the global supply of rare earths and previously used these materials as a strategic tool in response to geopolitical tensions. The suspended restrictions are part of a wider maneuver aimed at reshaping negotiations without immediately disrupting global supply chains.

Strategic Elements and Global Supply Chain Risks

The paused restrictions likely include seven rare earths—samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium—essential for the production of semiconductors, electric vehicles, aerospace technologies, and precision weapon systems. These materials were listed in Beijing’s April export control measures, which had sparked concern across Western industries.

Under the new arrangement, companies can now apply for export licenses during the 90-day window. While this doesn’t guarantee continued access, it signals China’s willingness to use flexibility in strategic resource control to gain leverage in trade discussions.

Markets React with Optimism

Financial markets responded positively to the announcement. The U.S. dollar strengthened, and global stock indices rallied as investors welcomed signs of reduced U.S.-China tension. President Donald Trump described the agreement as “a brand-new beginning” for bilateral relations, emphasizing the potential for further cooperation.

In addition, the Chinese Ministry of Commerce issued a separate notice temporarily lifting trade and investment restrictions on 17 additional U.S. companies—another gesture seen as conducive to constructive negotiations.

A Pause, Not a Policy Shift

While the suspension offers a diplomatic opening, it does not signal a fundamental change in China’s approach to trade or national security. The dual-use nature of the affected goods means Beijing retains the option to reintroduce controls should talks falter.

At the same time, the U.S. has retained key pressure points—including high tariffs on sensitive imports and demands for Chinese action on fentanyl exports and market access. The current reprieve buys time, but the underlying strategic rivalry remains unresolved.

China’s move to suspend rare earth export bans is a calculated gesture designed to restart talks without weakening its position. As trade negotiations resume, businesses and governments alike will be watching closely to see whether this shift leads to a durable reduction in tensions—or merely postpones the next round of economic confrontation.

Source: AP

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Michelle

Economic

Commodity

The IEA has nudged up its global oil demand growth forecasts for this year and 2026, citing better macroeconomic forecasts and the effects of lower oil prices.

In its latest Oil Market Report (OMR), published today, the Paris-based watchdog raised its projected increase in oil consumption by 20,000 b/d to 740,000 b/d in 2025, bringing overall demand to 103.9mn b/d.

It increased its oil demand growth forecast for 2026 by 70,000 b/d to 760,000 b/d.

In its previous OMR the IEA cut its oil demand forecasts for 2025 by 310,000 b/d after the US' announcement of an array of import levies in April. But the IEA said today the tariff supply shock appeared less severe than initially implied, pointing to subsequent US trade arrangements with the UK and China. US talks with other countries continue.

"Subsequent pauses, concessions, exemptions and negotiations are likely to attenuate the levies' permanence and economic impact," the IEA said.

But it said policy uncertainty continued to weigh on consumer and business sentiment, and it sees oil consumption growth slowing to 650,000 b/d between now until the end of 2025, from 990,000 bd/ in the first quarter of the year.

Its demand growth forecast for 2025 is 320,000 b/d lower than at the start of the year.

The IEA increased its global oil supply growth forecast by 380,000 b/d to 1.61mn b/d in 2025, with almost all the rise accounted for by the Saudi-led unwinding of Opec+ cuts. It nudged its oil supply growth forecast for 2026 up by 10,000 b/d to 960,000 b/d.

Eight Opec+ members earlier this month agreed to continue accelerating the pace of their planned unwinding of 2.2mn b/d of crude production cuts for June.

The IEA again revised down its supply growth forecasts for the US, mainly because of the effects of lower oil prices on US shale producers. It downgraded US growth by 50,000 b/d to 440,000 b/d for 2025 and by 100,000 b/d to 180,000 b/d for 2026, and said US tight oil production in 2026 would contract on an annual basis for the first time since 2020.

The IEA said sanctions on Russia, Iran and Venezuela are a key uncertainty in its forecasts. It noted that Russian crude supply grew by 170,000 b/d in April as crude prices fell below the G7 $60/bl price cap.

The IEA's balances show supply exceeding demand by 730,000 b/d in 2025 and by 930,000 b/d in 2026. It said global observed stocks rose by 25.1mn bl in March, with preliminary data showing a further rise in April.

Source: Argus Media

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Gerik

Russia-Ukraine Conflict

A Strategic Blend of Authority: Russia’s Delegation Unpacked

Late on May 14, the Kremlin named the officials set to represent Russia in proposed peace talks with Ukraine in Istanbul. Though President Vladimir Putin will not attend in person, the composition of his delegation sends a clear message: Moscow is approaching negotiations with a calculated mix of propaganda control, intelligence expertise, military influence, and diplomatic maneuvering. The appointment of key figures from past talks and strategic operations reflects both continuity and escalation in Russia’s approach to war diplomacy.

Heading the delegation is Kremlin aide Vladimir Medinsky, a former culture minister and a central figure in the failed 2022 peace negotiations. Born in Soviet Ukraine and a graduate of MGIMO—Russia’s elite foreign affairs university—Medinsky is also the architect of Russia’s revamped history education agenda. He chairs the Russian Military Historical Society, known for promoting nationalist interpretations of Russian history. His role signals an ideological component to the talks, in which Russia may seek to justify its war aims through cultural and historical framing.

Mikhail Galuzin – The Regional Diplomat

Deputy Foreign Minister Mikhail Galuzin brings extensive experience in post-Soviet regional diplomacy, overseeing relations with the Commonwealth of Independent States (CIS). Fluent in Japanese and English, Galuzin adds diplomatic breadth to the delegation. His presence reflects Russia’s intent to position the war within a broader geopolitical struggle involving former Soviet republics.

Igor Kostyukov – The Intelligence Operator

The appointment of Igor Kostyukov, head of the GRU (now GU), underscores the intelligence dimension of the talks. As the first naval officer to lead the powerful agency, his inclusion suggests a strong emphasis on strategic and military intelligence. Kostyukov’s role also likely includes internal risk monitoring and coordination of security narratives presented during negotiations.

Alexander Fomin – Military Liaison with Negotiating Experience

Deputy Defence Minister Alexander Fomin previously participated in 2022 negotiations and will reprise his role. A seasoned intermediary between military operations and diplomatic channels, Fomin provides a bridge between battlefield developments and policy objectives. His familiarity with past negotiation dynamics may help ensure continuity in Russia’s tactical messaging.

Expert Team: Tactical Minds and Humanitarian Covers

Alongside the high-profile officials, Putin has approved a team of technical and advisory experts:

Alexander Zorin, a military reconciliation specialist and deputy chief of information in the General Staff, brings expertise from Syria, indicating Russia's desire to position itself as a broker capable of managing both conflict and diplomacy.

Yelena Podobreyevskaya, a key figure in the Kremlin’s humanitarian policy directorate, is likely included to present a softer façade—emphasizing non-military elements of Russia’s war narrative.

Alexei Polishchuk, director of the Foreign Ministry’s CIS department, manages portfolios involving Ukraine, Belarus, and Moldova. His experience will be critical for managing post-conflict territorial and political arrangements.

V. Shevtsov, deputy head of international military cooperation, represents Russia’s interest in framing the talks within a global military strategic context, likely aimed at countering NATO narratives.

Though absent from the table himself, Putin’s delegation reflects a hybrid strategy: part ideological assertion, part military posturing, and part regional bargaining. The inclusion of intelligence chiefs and military officials suggests that the Kremlin does not view the Istanbul talks as merely symbolic. Instead, it seeks to shape the peace process with hard power and controlled messaging. The broader implication is that Russia’s tactical presence at the talks may serve less to compromise and more to reinforce its long-term positioning in Ukraine and beyond.

Source: Reuters

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Glendon

Economic

President Donald Trump said India has made an offer to drop tariffs on US goods, as the Asian nation seeks an agreement on import taxes.

Speaking Thursday at an event with business leaders in Qatar, Trump said the Indian government has “offered us a deal where basically they are willing to literally charge us no tariff.”

Trump did not offer further details of New Delhi’s apparent offer and the Indian government did not immediately respond to a request for comment.

The US president also said he spoke with Apple Inc. Chief Executive Officer Tim Cook to discourage him from expanding production in India.

“I said I don’t want you building in India,” Trump said about a conversation he said he had with Cook.

As a result of their discussion, Trump said Apple will be “upping their production in the United States.”

Source: Bloomberg Europe

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Blue River

Economic

Forex

The EURUSD pair enters another consolidation phase due to a mix of opposing factors. The market must weigh the White House’s intentions, US trade policy implications, and the upcoming data releases. The EURUSD outlook for today, 15 May 2025, anticipates a wave of selling towards 1.1163.

The EURUSD pair remains stable around 1.1195. The market has a plethora of crucial statistics ahead. Find out more in our analysis for 15 May 2025.

EURUSD forecast: key trading points

●The market believes the White House may be intentionally weakening the US dollar

●Focus shifts to a large batch of key data releases due tonight, including retail sales and industrial production

●EURUSD forecast for 15 May 2025: 1.1163

Fundamental analysis

The EURUSD pair is hovering around 1.1195 on Thursday. Trade uncertainty continues to pressure the market despite a recent easing in tensions.

Investors actively debate whether Washington may be deliberately pursuing a weaker dollar as part of ongoing trade negotiations. The Trump administration previously argued that a strong dollar and weak regional currencies create unfavourable conditions for US exporters.

The dollar’s recent strength, driven by optimism over tariff reductions in US-China talks, has started to fade. The market’s attention has now returned to the broader economic impact of Washington’s trade policy.

Thursday brings a heavy load of crucial US dollar data, including retail sales, producer inflation figures, and the March industrial production report.

The EURUSD forecast is moderately negative.

Technical analysis

On the H4 chart, the EURUSD pair has room for a local pullback towards 1.1163. If the market goes lower, the path to 1.1064 could open, although not immediately.

On a larger timeframe, the main currency pair hovers in a sideways channel between 1.1163 and 1.1265.

Source: RoboForex

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Gerik

Economic

Surging Long-Term Yields Challenge Policy Normalisation

The Bank of Japan’s efforts to exit decades of ultra-loose monetary policy are facing a critical test. Despite having scrapped its yield curve control regime and ended negative interest rates in 2024, the BOJ now confronts market turmoil in the form of soaring super-long bond yields. The 40-year Japanese government bond (JGB) yield hit a record high of 3.44% this week, revealing intensifying market skepticism over Japan’s fiscal path and the durability of monetary tightening.

This sharp divergence in yield movements—where short- and mid-term maturities remain stable while super-long rates rise—has exposed a potential vulnerability in the BOJ’s quantitative tightening framework. Analysts warn that, although the BOJ is unlikely to reverse course or ramp up bond purchases, the deterioration in bond market liquidity and mounting volatility may force a reassessment of tapering pace and bond maturity composition.

Fiscal Policy and Election Pressures Erode Market Confidence

Behind the spike in super-long yields lies a growing unease about Japan’s fiscal discipline. Ahead of the upper house election scheduled for July, lawmakers are pushing for expansive fiscal measures—including tax cuts and stimulus packages—that could further inflate Japan’s already massive public debt burden. With the BOJ stepping back from the bond market, investors are increasingly sensitive to the government’s fiscal trajectory.

Life insurers, historically reliable buyers of long-dated JGBs, have begun scaling back their participation, further eroding market demand. This has led to liquidity strains and widened bid-ask spreads in the super-long end of the yield curve, increasing the likelihood of further market dysfunction. Strategists such as Katsutoshi Inadome of Sumitomo Mitsui Trust highlight how this retreat signals a structural shift, one that monetary policy alone may not be able to counterbalance.

Cautious QT Review on the Horizon

In light of the evolving dynamics, the BOJ will hold consultations with financial institutions next week to gather feedback on tapering preferences. These discussions will feed directly into the central bank’s review at its June 16–17 policy meeting. While the current taper framework—scaling back bond purchases by ¥400 billion per quarter to halve monthly buying to ¥3 trillion by March 2026—remains on track, future guidance beyond April 2026 is up for debate.

Officials within the BOJ remain cautious. A board member noted that the recent rise in super-long yields must be considered when assessing liquidity across maturities. While the central bank aims to offer predictability and flexibility in its QT schedule, abrupt market shifts may force a more nuanced approach, especially if volatility in the super-long segment spills into the broader bond market.

QT’s Limits in a Politically Driven Fiscal Environment

Despite its autonomy, the BOJ cannot fully shield its tapering strategy from political realities. Prime Minister Shigeru Ishiba has so far resisted internal pressure to reduce the consumption tax rate, but he faces mounting demands from ruling party factions for new fiscal spending. Any such move would undermine efforts to stabilize long-term debt dynamics and could amplify bond market stress.

Mari Iwashita, rates strategist at Nomura Securities, underscores that structural challenges—such as the BOJ’s reduced market presence, shrinking investor appetite for long-dated paper, and political overdependence on fiscal expansion—are not short-term frictions but long-term constraints. These headwinds, she argues, place clear limits on the effectiveness of the BOJ’s taper strategy and heighten the risk of credibility erosion.

The BOJ's ongoing QT efforts face an inflection point. While the current pace of tapering remains intact, recent bond market instability highlights the limits of a rigid normalization plan in the face of fiscal excess and political uncertainty. Without credible fiscal consolidation and broader investor confidence, the central bank’s exit from stimulus risks being delayed, disrupted, or diluted. As the June policy review approaches, the BOJ must carefully balance its desire for policy normalization with the practical constraints of an increasingly fragile bond market.

Source: Reuters

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Gerik

Economic

Resilient Q1 Masked by Growing Policy Uncertainty

European corporates managed to post a fourth consecutive quarter of earnings growth in Q1 2025, with profits rising 1.9% year-on-year, according to LSEG I/B/E/S data. Excluding the energy sector, the picture was even stronger, with earnings up 7.3%. Approximately 60% of companies surpassed analyst forecasts—above the 54% average for typical quarters. However, the outlook beyond March has darkened significantly due to the reemergence of trade-related instability, mainly triggered by the Trump administration’s tariff strategy.

Market participants and analysts now draw parallels between the current lack of visibility and the uncertainty experienced at the onset of the COVID-19 crisis in Q1 2020. The abrupt implementation of tariffs and subsequent truce has left companies unwilling to issue firm forward guidance, indicating a fragile confidence in forecasting for the rest of the year.

Earnings Misses Face Harsh Market Reaction

While earnings beats have met historical norms in terms of share price reactions, earnings misses have been penalized more severely than at any point in the past decade. Goldman Sachs reported that underperforming firms saw their shares drop an average of 2% post-announcement. Analysts believe this reflects the market’s suspicion that some Q1 results may have benefited from demand front-loading ahead of potential trade disruptions in Q2. As a result, even lowered expectations did not shield underperformers from selloffs.

Euro Appreciation Compounds Exporter Struggles

Trump’s tariff barrage has not only destabilized trade expectations but has also coincided with a sharp rally in the euro. Since its February low, the euro has gained approximately 10% against the U.S. dollar as capital fled dollar-denominated assets. Although the currency has slightly retreated following the U.S.-China tariff pause, it remains elevated, squeezing profit margins for eurozone exporters.

For the STOXX 600 index—where roughly 60% of revenues are generated outside the eurozone—the strong euro presents a material challenge. Companies such as SAP, Munich Re, Bayer, Prysmian, Unilever, and L'Oréal have explicitly flagged currency headwinds in their outlooks. This dual exposure to tariffs and currency volatility creates a disproportionate drag on multinationals that rely on U.S. and global markets for growth.

Banking Sector Emerges as a Bright Spot

Unlike cyclicals and exporters, the banking sector has shown notable resilience. Nearly 90% of European banks beat earnings expectations in Q1, according to UBS estimates. Despite broader volatility, banks maintained 2025 forecasts and demonstrated stable net interest income performance, even as rate expectations moderate.

The sector has also regained investor favor. A recent BofA fund manager survey shows that financials are now the most overweight sector in Europe, benefitting from attractive dividend payouts, improved capital buffers, and less sensitivity to trade frictions. Year-to-date, the sector has gained 28%, and forward valuations remain supportive compared to broader indices.

Energy Sector Drags on Aggregate Performance

In contrast to banking, the energy sector was a significant detractor. Earnings from energy companies are expected to fall by 28% compared to Q1 2024, reflecting weaker oil prices and shifting global demand dynamics. Oil dropped to a four-year low in April as concerns over global consumption deepened amid Trump’s tariff rollout, although prices have seen a partial recovery following the trade truce.

Analysts note that reduced economic activity, combined with unexpectedly high OPEC output, has pressured margins and reduced earnings visibility for energy giants. With global demand outlooks tied closely to geopolitical developments, volatility in the sector is expected to persist.

Europe Inc’s robust Q1 performance offers reassurance that the region’s corporate sector can still deliver results in volatile conditions. However, the optimism is tempered by deteriorating forward visibility, a rising euro, and geopolitical unpredictability. The reintroduction of tariff diplomacy, combined with asymmetric sectoral impacts, has fragmented the earnings landscape. Investors and companies alike are now navigating without clear forward signals, and with elevated risk premiums on trade-sensitive industries, the remainder of 2025 is poised to test Europe’s economic resilience.