Europe Risks Rare Earth Crisis as US Surges Ahead in Supply Chain Independence

Economic

Summary:

Vacuumschmelze GmbH, a major European magnet maker, has warned that Europe is dangerously behind in securing rare earth supply chains, relying too heavily on China...

US Leads Rare Earth Reshoring While Europe Lags Behind

Vacuumschmelze GmbH, a German firm with over a century of industrial heritage and four decades of experience in rare-earth magnet production, has issued a stark warning: Europe’s lack of urgency in building independent rare earth supply chains could lead to an economic and industrial crisis. CEO Erik Eschen, speaking after launching a new production facility in South Carolina, emphasized the strategic divide between the US and Europe.

While the US government has poured resources into companies like MP Materials Corp. and greenlit rare earth mining and processing ventures across North America and allied nations, European counterparts have taken a wait-and-see approach. Eschen accused European political and industrial leaders of passivity, relying on US or Chinese solutions rather than leading their own.

China’s Dominance and Europe’s Exposure

China’s historical control of the rare earth market estimated at over 80% of global supply has long posed a strategic risk. During the recent US-China trade war, rare earths were wielded as leverage by President Xi Jinping’s administration. Even after the trade truce, supply chain vulnerabilities remain. For Europe, and especially Germany China’s largest European customer for magnets the risk is acute.

Despite the implementation of the EU’s Critical Raw Materials Act in 2024, which aims to safeguard access to 34 strategic resources including rare earths, critics argue that the legislation lacks the financial backing and political momentum needed to be effective. Without decisive investment in domestic capabilities, Europe could become increasingly marginalized in the next phase of industrial competition.

Industrial Capacity Expanding Rapidly in the US

Vacuumschmelze’s South Carolina facility, now operational, will initially produce 2,000 tons of magnets annually, with plans to reach 12,000 tons over the next few years. It is one of several US-based efforts to reshore magnet and materials production. Neighboring North Carolina will soon host Vulcan Elements Inc.’s $1 billion magnet plant the largest outside China.

This proactive stance contrasts sharply with Europe’s fragmented response. Eschen warned that technical expertise is already beginning to migrate to North America and Australia, where government and private-sector funding is more readily available. If the trend continues, Europe risks not only losing access to raw materials but also the critical knowledge base to process them competitively.

Delayed Response May Prove Costly

European industries that delay securing non-Chinese supply lines may find themselves at the back of the queue when demand spikes. Eschen cautioned that customers waiting to source from Vacuumschmelze’s new plant may face delays of 12 to 24 months due to limited initial capacity. While some defense-related firms are diversifying now, many commercial clients remain complacent.

The broader concern is not just about sourcing but about strategic resilience. With rare-earth magnets essential in electric vehicles, wind turbines, robotics, and advanced electronics, disruptions could stall Europe's energy transition and digital economy goals.

Vacuumschmelze’s public criticism signals more than a corporate grievance it’s a warning to European leaders that geopolitical realities require strategic foresight. As the US accelerates supply chain independence and nations like Australia and Brazil grow their rare earth industries, Europe must urgently align funding, industrial policy, and private sector engagement to avoid becoming dependent, vulnerable, and technologically obsolete.

Source: Bloomberg

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Economic

Commodity

Market Overview: Gold Strengthens Despite Equity Weakness

Gold rose by as much as 0.7% on Wednesday, continuing its rebound from a three-day decline. The rise comes amid falling global equities and heightened market volatility, particularly as investors brace for Nvidia’s earnings and further clarity from the Federal Reserve’s upcoming minutes. Despite recent dips, gold remains up nearly 55% year-to-date its strongest annual performance since 1979 and is widely expected to continue climbing into 2026.

Ole Hansen of Saxo Bank noted that leveraged traders who were forced to sell in volatile conditions are increasingly being replaced by long-term investors and central banks. This transition, he suggested, is “building the foundation” for another gold rally in 2026.

Investor Sentiment and Central Bank Demand

A Bank of America survey shows gold is expected to deliver the second-highest returns in 2026, just behind the Japanese yen. Strong central bank demand has bolstered bullion this year, as global investors hedge against debt default risks and currency devaluation especially amid growing concerns over sovereign debt in developed markets.

Despite brief pressure from equity-linked selling, the steady absorption of supply by institutional players has kept gold resilient. According to market analysts, the fundamental demand drivers for gold remain robust, including macro uncertainty, geopolitical instability, and liquidity shifts.

Fed Policy in Focus: Minutes and Data Vacuum

Investor attention is sharply focused on the upcoming release of the Federal Reserve's October meeting minutes. These are expected to shed light on the timeline for interest rate adjustments and potential liquidity injections via reserve management purchases. With the longest US government shutdown having disrupted the flow of economic data, the Fed minutes could provide essential clarity on policy direction.

At the same time, the September jobs report delayed by the shutdown is due Thursday and will offer a partial snapshot of labor market health. Meanwhile, expectations for a December rate cut have waned slightly, with swaps now showing only a 50% probability, down from near certainty just weeks ago.

Gold Poised for Continued Strength

As of Wednesday afternoon in Singapore, gold was trading at $4,092.30/oz. Other precious metals such as silver, palladium, and platinum also posted gains, while the Bloomberg Dollar Spot Index remained flat.

Despite recent market turbulence, gold’s performance reflects strong underlying demand and cautious optimism for 2026. With central banks maintaining robust buying patterns and investors increasingly viewing gold as a safe-haven alternative amid mixed monetary policy signals, the metal remains a key asset to watch in the year ahead.

Source: Bloomberg

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Justin

Forex

Stocks

The day has come, ladies and gentlemen. The biggest — and for some, the most important — company in the world, Nvidia Corporation, is about to reveal its earnings. My crystal ball is whispering that today, after the US closing bell, Nvidia will probably dump another set of jaw-dropping numbers on the table — perhaps a few more billions in sales revenue than the ~$55 billion expected by analysts (which would already be a nearly 60% growth compared to the same time last year) and a gross margin of ideally more than 73%.

The company will likely give another stellar guidance and remind everyone that China — once their VIP client — doesn't even matter in their forecast as much as it did before. CEO Jensen Huang wants investors to assume that the Chinese revenue will be zero. Anything on top of that would be the cherry on top.

But what my crystal ball doesn't tell is how investors will react. Everyone is now focused on the worries that the huge spending its too high compared to revenue potential, and on the rising anxiety around the circularity of AI deals. Another one just dropped yesterday between Nvidia, Microsoft and Anthropic. The former two will invest a combined $15bn into Anthropic, and the latter will buy computing power from Microsoft's Azure that – in turn – will be powered by Nvidia chips.

Told like this, the whole AI thing does sound like nothing more than a handful of companies sending each other billions of dollars without hints of money flowing inside the circle from outside. But it's like Mc Donalds buying beef and tomatoes for its burgers. It must do it. Eventually someone will buy the burger. But when, and how much burger is to be seen.

Add to that the fact that Japanese yields are now at levels where Japanese investors prefer bringing their money back to Japan. The 10-year Japanese government bond yield surpassed levels where borrowing yen and placing it in US Treasuries makes no money— after taking FX hedging costs into account. As a result, the Japanese pensions funds are reportedly pulling $1.1 trillion out of the US Treasuries right now – meaning that one of the biggest Treasury buyers is turning into a net seller.

In plain English, the Japs may be pulling the rug from under the US Treasury market – that also affects riskier investments like tech, EM stocks and crypto. So maybe we will simply blame the Japanese if the Bank of Japan BoJ) dares hiking rates come December… and that Santa remains stuck somewhere where there's still snow this Xmas.

But on a more optimistic note, I don't think the BoJ will gather enough courage to move rates higher. Provided the stress in JGBs, the BoJ Team certainly sees that a rate hike could trigger a budget-crisis scenario akin to what we saw with Liz Truss in the UK. And a severe earthquake in the JGB markets would then trigger a tsunami across global financial markets.

So, if markets don't turn risk-on after Jensen Huang pushes the 'on' button tonight, it may be time for a 10-20% correction. And of course, some love adding fuel to the fire saying that current Big Tech valuations are based on a US 10-year yield of around 2% — continuously — and so if someone comes out and says 'the emperor is naked' and the new 10-year benchmark is say nearer 3.5%, valuations could take a 30-40% hit. It's simple math: many favourite tech stocks trade 25-35 times their earnings. A readjustment of the discount rate could compress them to 18-22 times. So, either your price falls 30-40% or earnings grow strong enough to counteract the higher discount rate. But it's not that simple.

A month ago — when AI deals were flying in the air — your average tech investor would rather see earnings grow fast enough to neutralise the impact of higher US yields. Today, all they worry about is rising debt. And debt smells worse when borrowing costs mount… The mounting anxiety is pushing credit default spreads to levels some compare to banks just before the sub-prime crisis — with CoreWeave, Tesla, Inc. and Oracle Corporation occupying the top positions in the list of companies most expensive to hedge against default in the next half-decade.

But it's crazy we went from "AI is everything we always dreamed of" to "this is a worthless bubble" and "screw you OpenAI." But I can tell you: when an outage at Cloudflare disrupted OpenAI yesterday, and my ChatGPT gave a message saying that I should 'unblock challenges.cloudflare.com to proceed,' I didn't know where to go, what to do, who to ask — a small reminder that when ChatGPT is now around, it doesn't feel the same.

So, reason tells me there should be a midway between these two extremes — relentless rally and that 30-40% meltdown. Nvidia and other chip companies will certainly continue to sell their chips and grow their fortune; tech companies will continue to develop their AI models, rent data-centres and sell their products to companies outside the tech buddies— say healthcare, banks, hairdressers, tax-offices, McDonalds and anything you could think of. Some will fail. Others will survive. And those who survive will eventually see revenue flow in. Someone will buy the burger.

As for spending, it will level out when the first booming phase is over. Maybe there will be a financial crisis before we get to the safer side of the bridge, but eventually the world will survive. If not, robots will come to the rescue. And while this happens, central banks will be there to temper any potential crisis and print money.

Source: ACTIONFOREX

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Gerik

Economic

Incentivizing Long-Term Stock Participation

In a press meeting on Wednesday, South Korean Finance Minister Koo Yun-cheol revealed plans to roll out incentives aimed at small investors who commit to long-term participation in the local capital markets. This move seeks to address the short-term trading mentality that has dominated retail investment, especially during periods of volatility driven by external macroeconomic forces. The initiative would likely involve tax benefits or other regulatory support to encourage stability and depth in the domestic equity market.

In parallel with investment incentives, Koo emphasized the government’s commitment to stabilizing the foreign exchange market, which has faced pressure from global interest rate fluctuations and uneven capital flows. The South Korean won, like other regional currencies, has experienced volatility in recent months, prompting officials to engage more actively with market participants to contain speculation and reduce uncertainty.

One specific concern raised by the minister involves large exporters who are not promptly repatriating U.S. dollar revenues earned abroad. This behavior has the effect of tightening local dollar liquidity and may exacerbate currency depreciation. While no punitive measures were announced, Koo’s public statement serves as a soft warning and a call for corporate responsibility in supporting macroeconomic stability.

Pressure on Pension and Corporate Investment Abroad

Koo also acknowledged the growing outbound investment activities of South Korea’s National Pension Service, one of the world’s largest pension funds. As it increases overseas allocations, the demand for foreign currency rises, which can add further pressure to the won. Although the minister has not yet held direct talks with the pension authority, his remarks signal future discussions about balancing overseas investment with currency risk management.

In a notable remark, Koo pointed out that while the government is using taxpayer money to negotiate trade advantages such as reduced tariffs under the $350 billion U.S. trade deal it expects reciprocation from corporations, particularly in aligning their behavior with national economic priorities.

South Korea’s dual approach of market incentives and policy engagement reflects a broader strategy to strengthen the resilience of its financial system. As global uncertainty persists, aligning investor behavior, corporate capital flows, and public investment strategies will be key to maintaining both market confidence and currency stability.

Source: Bloomberg

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Justin

Political

Economic

The Dutch government suspended its powers over chipmaker Nexperia, restoring control to its Chinese owner and defusing a standoff with Beijing that had begun to hamper automotive production around the world.

The order that gave the Netherlands powers to block or revise decisions at Nexperia was dropped as "a show of goodwill," Economic Affairs Minister Vincent Karremans said Wednesday in a post on social media site X.

Bloomberg had reported earlier this month that the Netherlands was prepared to take the step if chip deliveries from the company's site in China could be confirmed.

The move marks a significant de-escalation of a dispute that underscored the global nature of supply chains and highlighted Beijing's growing leverage. Even though Nexperia's chips aren't advanced and the company only operates one facility in China, the spat disrupted automakers from Honda Motor Co. to Volkswagen AG.

Karremans sparked the dispute in late September by invoking a Cold War-era law to gain powers over decisions at Nexperia, which is owned by China's Wingtech Technology Co. The Chinese government retaliated by imposing export restrictions over components from the Dutch company's facility in Guangdong, which assembles chips from wafers made in Europe.

The reversal by the Dutch government was set in motion after a breakthrough in talks earlier that involved Chinese and Dutch officials, with input from Germany, the European Union as well as the US. To help resolve the stalemate, Beijing agreed to loosen export restrictions from Nexperia's Chinese plant, the largest of its kind in the world.

The Dutch economic affairs ministry sent a delegation to Beijing this week to negotiate a "mutually agreeable solution," according to a ministry statement.

Source: Bloomberg Europe

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Economic

Unemployment Rolls Swell After Government Shutdown

The US labor market showed signs of strain between mid-September and mid-October, as continuing claims for unemployment benefits rose from 1.916 million to 1.957 million. The data released after a 43-day government shutdown reveals potential deterioration in hiring activity during the October employment survey period. This rise in claims, often viewed as a proxy for hiring trends, suggests that the unemployment rate may have remained elevated or even increased in October. The last official figure for August pegged the rate at 4.3%, a near four-year high.

The Labor Department attributed the delay in releasing jobless data to technical issues, noting that the full dataset will be available by November 20. Notably, no official unemployment rate for October will be published due to incomplete household survey data during the shutdown.

Private Sector Job Losses Moderate, But Concerns Linger

Separate figures from payroll processor ADP show that private employers shed about 2,500 jobs per week on average between early October and November 1. While this suggests a slowing pace of job cuts compared to earlier months, it still reflects a weak labor environment. However, first-time claims remained unchanged during the survey period, offering a sliver of optimism that widespread layoffs did not accelerate despite economic uncertainty.

Carl Weinberg of High Frequency Economics highlighted that the steady initial claims figures contradict theories of mass job cuts during the shutdown. This steadiness could reduce pressure on the Federal Reserve to cut rates in December, especially as policymakers remain cautious about further easing.

Homebuilder Confidence Remains Depressed

Weakness in the labor market is now rippling into the housing sector. The National Association of Home Builders/Wells Fargo Housing Market Index remained subdued in November, marking its 19th straight month below the 50-point threshold, despite ticking up one point to 38.

High mortgage rates, persistent job market unease, and unaffordable home prices are deterring new buyers. Analysts at Pantheon Macroeconomics anticipate that a true housing market recovery may not materialize until mid-2026, when interest rates are expected to fall further alongside a rebound in job growth.

Builders are increasingly relying on incentives to close sales: 41% reported cutting prices the highest since May 2020 while 65% are offering other buyer incentives. Still, the share of interested buyers remains low, with the buyer traffic index at just 26.

Political Reactions and Long-Term Housing Trends

Amid mounting pressure to address housing affordability, former President Donald Trump proposed a 50-year mortgage policy to ease monthly costs. Critics argue such a measure would increase long-term interest burdens and delay wealth accumulation through home equity.

Meanwhile, demographic trends reflect the difficulty of entering the housing market: the National Association of Realtors reports that the median age of first-time homebuyers has risen to 40, compared to the late 20s in the 1980s.

With lingering data distortions and no official October unemployment rate, policymakers and investors face a murky short-term outlook. Although layoffs haven't spiked, the rise in continuing claims and fragile homebuilder sentiment point to structural challenges in both employment and housing. Until more comprehensive labor data is released, the Federal Reserve is likely to tread cautiously balancing inflation control with the need to support a still-fragile recovery.

Source: Bloomberg

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Gerik

Economic

Soft Start for Europe as Tech Uncertainty Persists

European indices saw a subdued open midweek, reflecting continued hesitation across global markets, particularly in the technology sector. According to IG market data, the UK’s FTSE 100 opened flat, Germany’s DAX slipped by 0.2%, France’s CAC 40 eased by 0.11%, while Italy’s FTSE MIB ticked slightly higher.

The restrained start mirrors Wall Street’s overnight performance, where major US indexes extended their decline amid persistent pressure on tech stocks. The Nasdaq Composite and S&P 500 both ended Tuesday in the red, dragged down by a broader tech retreat.

Nvidia Earnings in the Spotlight

All eyes are now on Nvidia’s Q3 earnings, set to be released after the US market close. The chipmaker has become a bellwether for the AI rally, and investors are keen to see whether the company can justify its meteoric valuation with another blockbuster quarter.

Analysts are optimistic, broadly expecting Nvidia to beat Wall Street forecasts on both earnings and revenue. Demand for its high-performance GPUs essential for AI training and inference remains robust, particularly from hyperscalers, cloud firms, and data center providers.

However, investor sentiment has turned cautious. Many are already locking in profits, fearing that even strong numbers might not be enough to sustain Nvidia’s rally. With AI stocks like Nvidia trading at elevated multiples, the margin for error is razor-thin.

A disappointment in earnings or forward guidance could trigger a broad tech pullback, especially if it signals a slowdown in enterprise AI investment or supply chain issues due to ongoing US chip export controls.

Additional Catalysts: UK Inflation, Corporate Earnings

Beyond Nvidia, Wednesday also brings UK CPI data for October, a critical print that could shape expectations for Bank of England policy going into 2026. Markets are looking for signs that inflationary pressures are easing after months of stubborn price growth, particularly in services and housing.

Investors will also be digesting corporate results from British firms including Sage Group, Severn Trent, and Smiths Group, which could offer insight into broader consumer and industrial trends across the UK and Europe.

Market Outlook: Eyes on Tech, Data, and Central Banks

The rest of the week remains data-heavy, and market volatility may pick up depending on Nvidia’s performance and macroeconomic releases. Traders remain sensitive to shifts in central bank tone, especially with the European Central Bank and Bank of England walking a fine line between inflation control and growth support.

In the near term, tech remains the key swing factor, and Nvidia’s results may either stabilize sentiment or trigger deeper correction fears. European equities, while less tech-heavy than their US counterparts, remain exposed through global supply chains, semiconductor firms, and investor sentiment.

A clear earnings beat from Nvidia and softer inflation could help restore market confidence. But any signs of AI fatigue or profit margin compression could add pressure on the broader equity complex.