Wall St Selloff Deepens As Trump Threatens More Tariffs On China Over Rare Earth Dispute

Economic

Stocks

Summary:

Indexes down: Dow 1.2%, S&P 500 1.56%, Nasdaq 2.05%.Wall Street's fear gauge climbs.U.S.-listed shares of Chinese cos tumble.

Wall Street's calm was shattered on Friday after U.S. President Donald Trump rattled markets with the threat of a "massive increase" in tariffs on Chinese imports over a rare earths dispute, sending indexes tumbling and volatility spiking.

In a Truth Social post, Trump also called off his planned meeting with China's President Xi Jinping in South Korea. He said Beijing had been sending letters to countries to tell them that it planned to impose export controls on every element of production related to rare earths.

The sharp selloff in indexes disrupted a relatively quiet week for markets, which had been gaining on hopes of dovish monetary policy, and underscored how sensitive investor sentiment remains to trade uncertainty.

A fresh flare-up in U.S.-China trade tensions could weigh on global growth and cloud the outlook for corporate America, which is already navigating higher costs.

"He's caught the market off guard again and he's thrown more question marks into it," said Robert Pavlik, senior portfolio manager at Dakota Wealth.

At 12:11 p.m. ET, the Dow Jones Industrial Averagefell 554.58 points, or 1.20%, to 45,803.84, the S&P 500lost 105.34 points, or 1.56%, to 6,629.77 and the Nasdaq Compositelost 471.76 points, or 2.05%, to 22,552.86.

All three indexes were on track for weekly declines if current levels hold.

"We finally got through the worst of the tariff concerns, and now we find ourselves once again faced with another round of them," said Steve Sosnick, chief market analyst at Interactive Brokers.

The S&P 500 techsector lost 2%. Financialsfell 1.4% on the S&P 500, while energystocks declined 1.8%.

The Philadelphia SE Semiconductor indexdropped 3.7%, among the worst hit after Trump's announcement.

China produces over 90% of the world's processed rare earths and rare earth magnets, which are critical for products ranging from electric vehicles and aircraft engines to military radars.

Renewed tensions between the two largest global economies could trigger major supply chain disruptions, particularly for companies in technology, EV and defense space.

The CBOE volatility index, investors' fear gauge, spiked to the highest in a month.

U.S.-listed shares of Chinese companies dropped sharply, with heavyweights Alibaba Group Holding, JD.com Incand PDD Holdingsdown between 3.9% and 6.7%.

Qualcommfell 4.5% after China's market regulator said the country had launched an antitrust investigation into the semiconductor manufacturer over its acquisition of Israel's Autotalks.

Separately, a preliminary reading of the University of Michigan's consumer sentiment index for October came in at 55, compared with the estimate of 54.2, according to economists polled by Reuters.

Declining issues outnumbered advancers by a 2.73-to-1 ratio on the NYSE and by a 3.36-to-1 ratio on the Nasdaq.

The S&P 500 posted 17 new 52-week highs and 12 new lows while the Nasdaq Composite recorded 93 new highs and 82 new lows.

Source: TradingView

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James Whitman

Economic

Cryptocurrency

Citigroup Inc. is joining a group of nine European lenders developing a regulated euro-based stablecoin, the latest move by a large financial institution into the fast-growing area of digital money.

The New York-based bank intends to take part in the consortium as part of its broader efforts on blockchain and digital assets, a spokesperson confirmed on Friday.

The group — which includes ING Groep NV, UniCredit SpA and DekaBank — revealed late last month that they had formed a new company based in the Netherlands to manage the project and which aims to issue the token in the second half of 2026.

The move would make Citigroup the only known non-European bank to join the effort. Other firms part of the project include Banca Sella, KBC Group NV, Danske Bank AS, SEB AB, CaixaBank SA and Raiffeisen Bank International AG. The goal of the project is to “to provide a real European alternative to the US-dominated stablecoin market, contributing to Europe’s strategic autonomy in payments,” a statement by the banks said at the time.

Stablecoins — tokens designed to maintain a constant value against a traditional asset like the dollar — have surged in popularity over the past year as banks and other large financial firms see them as viable alternative payments methods. They could be used for more than $50 trillion in annual payments by 2030, Bloomberg Intelligence estimates. That would see the fiat-pegged tokens capture as much as 25% of consumer transactions, up from less than 1% now.

New stablecoins rules in Europe and the US have provided more regulatory clarity needed for large firms to enter the space, spurring a flurry of recent activity.

A group of banks including Citigroup, Goldman Sachs Group Inc and Bank of America Corp said earlier on Friday that they were joining forces to explore a stablecoin-like form of digital money. Earlier this week Citi’s venture arm made an investment in stablecoin infrastructure company BVNK. In July, Citigroup Chief Executive Officer Jane Fraser said on an earnings conference call that the bank was considering issuing its own stablecoin.

While the total amount of stablecoins in circulation has reached around $300 billion, the market is overwhelmingly dominated by dollar-denominated coins. Only about $477 million euro-tied coins are in circulation, according to crypto data tracker DefiLlama.

Big banks — including Citigroup — have also been developing other forms of blockchain-based payment services such as tokenized deposits. These are transferable digital coins that represent a deposit claim against a commercial bank. Proponents of the novel form of money suggest they could make transactions less costly and available 24/7.

Source: Bloomberg

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Adam

Commodity

The gold market has been unable to hold its recent gains above $4,000 an ounce, and while the market could be susceptible to profit-taking in the short term, it’s difficult to ignore the momentum that has driven prices to record highs, according to the latest commentary from the World Gold Council (WGC).

The WGC published its monthly report on gold-backed exchange-traded funds, which showed record inflows during the third quarter, with September accounting for more than 60% of the activity during the period.

According to the report, 145.6 tonnes of gold flowed into global ETFs last month, valued at more than $17.3 billion. For the quarter, ETF holdings increased by 221.7 tonnes, valued at nearly $26 billion.

The analysts noted that the sharp rise in gold prices pushed the value of assets under management to record highs; meanwhile, physical holdings were less than 2% below the record levels seen in November 2020.

In the regional breakdown, North American investors continued to lead the charge in the gold market. North American-listed gold ETFs saw inflows of 88.4 tonnes valued at $10.5 billion last month. The analysts said that investment demand throughout the month and the quarter was driven by similar factors.

“Dollar weakness persisted and now faces further pressure from the government shutdown. However, the dollar looks oversold technically and positionally, risking a short squeeze,” the analysts said. “Expectations of lower yields ahead, as the Fed delivered a 25bps cut during the month, also helped.”

European-listed funds saw their fifth consecutive month of inflows, with September marking the region’s third-strongest month ever for gold ETF activity. European holdings increased by 37.3 tonnes last month, valued at $4.4 billion.

“The ECB and BoE kept rates unchanged in the month, while inflation rose, lowering real rates and increasing policy uncertainty. Flows reflected both protection and momentum as investors sought a purchasing-power hedge and leaned into the breakout. Meanwhile, continued stagflation fears in the UK could be another key factor attracting gold ETF inflows,” the analysts said.

Asian-listed ETFs saw their holdings increase by 17.5 tonnes last month, valued at $2.1 billion.

“We believe the strong gold price performance in local currencies was a key factor. However, India led the region with inflows of US$902mn. We attribute this to favourable local currency dynamics and increased investment demand as investors look for safe havens amid weaker domestic equities and persistent geopolitical and trade risk,” the analysts said.

In a separate report, the WGC warned that robust investment demand — which drove prices to record highs last month — has pushed the market into significantly overbought territory. However, they added that while downside risks are growing, they still see strong fundamentals supporting prices through year-end.

Along with gold’s stretched bullish momentum, the WGC noted that the U.S. dollar is significantly oversold. However, one saving grace for gold could be a volatile equity market, as October is traditionally a turbulent month.

“While our analysis is only indicative, it leaves us somewhat confident that gold will hold its ground and perhaps see further uplift should equities experience a correction, given the plethora of supportive factors elsewhere,” the analysts said. “Perhaps only a major liquidity squeeze could upend both gold and equities, but there are no clear signs of fractures in credit or banking sectors…yet.”

Source: kitco

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Adam

Forex

The price has broken above the 100-day exponential moving average (EMA100, dark purple), which in March—amid trade-related uncertainty—initiated the strongest downward trend in the world’s leading currency since 2022. Pressure on the USDIDX began to stabilize after the index hit a 3-year low in June, but a sustained trend reversal seems unlikely given the direction of U.S. monetary policy, which could still turn more dovish.

Dollar at its strongest in two months 💲📈 Lack of U.S. data is suppressing the bearish trend_1

USDIDX broke above EMA100.

The swap market currently assigns a 75% probability to two interest rate cuts in the U.S. before the end of 2025. The Fed’s tone remains cautious, emphasizing a dual risk (potential increases in both inflation and unemployment), while the end of Jerome Powell’s term is approaching. Even if the Fed has ended the easing pause that began in December 2024, a truly dovish shift has yet to occur.

Dollar at its strongest in two months 💲📈 Lack of U.S. data is suppressing the bearish trend_2

Pricing of further U.S. interest rate cuts in the futures market.

Paradoxically, the dollar is strengthening despite the lack of major economic data releases (for instance, today’s weekly jobless claims were not published). This has shifted investors’ attention toward the “rest of the world,” particularly to politically chaotic France. It’s no surprise, then, that the euro has become one of the biggest losers in the dollar’s new bullish narrative. Over the course of the week, the common currency has weakened by about 1.5% against the USD, marking what could be its largest weekly drop since November 2024.

Dollar at its strongest in two months 💲📈 Lack of U.S. data is suppressing the bearish trend_3

EURUSD on weekly interval.

Source: xtb

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Thomas

Economic

The Bureau of Labor Statistics said it will publish the September consumer price index on Oct. 24, marking a rare exception to release data during the government shutdown.

The report will come out that day at 8:30 a.m. in Washington, compared to the original publication date of Oct. 15, the agency said Friday.

“No other releases will be rescheduled or produced until the resumption of regular government services,” BLS said in a statement. “This release allows the Social Security Administration to meet statutory deadlines necessary to ensure the accurate and timely payment of benefits.”

Source: Bloomberg Europe

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Samantha Luan

Forex

Political

Economic

Honda, BYD, and Chery dealerships in Mexico City, Mexico.

Mexican lawmakers will pause until late November the discussion of a government proposal to impose tariffs of as much as 50% on cars, steel and other products imported from China and several Asian nations that don’t have a trade deal with the country, according to a top congressman.Ricardo Monreal, leader of the ruling Morena party in the lower house of Congress, said that lawmakers must be careful with the proposal and review it “very seriously.”“We’re going to put it on hold,” Monreal told journalists. “We can address it by the end of November.”

The Economy Ministry didn’t immediately reply to a request for comment.

President Claudia Sheinbaum’s administration sent the plan to Congress last month, seeking to raise levies on more than 1,400 categories of products coming from countries with which Mexico has no trade agreement. Economy Minister Marcelo Ebrard said the proposal seeks to protect the Mexican industry from unfair competition.While the plan to Congress was initially made as part of the government’s proposed 2026 budget, lawmakers are now seeking to debate it separately from the spending plan.China, South Korea and India are among the exporters that would be hit under the proposed levies, which requires Congress approval. The import taxes would also affect items such as auto parts, toys and furniture, with rates of 10% to 50% depending on the category.

The proposal caused unease in China, which launched a trade barrier investigation aimed at safeguarding the interests of its industry, according to a statement from the Chinese Ministry of Commerce. The ministry reiterated that if Mexico goes ahead with the unilateral tariff hike, it will harm the interests of China and other trading partners, seriously undermine the predictability of Mexico’s business environment, and weaken investor confidence.“We have to be more careful, given that tariffs are being imposed on countries that, without being trading partners, engage in intense, and sometimes unfair trade with our products in Mexico,” Monreal added Thursday.

As part of the North American trade pact that includes the US, Canada and Mexico known as the USMCA, those trading partners would be unaffected by the tariffs. Sheinbaum’s proposal could favor trade negotiations between Mexico and the US ahead of the review of that trade agreement, which is scheduled for next year.Trump imposed a tariff of 25% on Mexican goods earlier this year, though most are exempted because they comply with the US-Mexico-Canada trade pact. Certain sectors including steel and autos have been affected by the levies.In late July, Trump agreed to continue talks with Mexico for a 90-day period, instead of further hiking tariffs as he did to other countries at the time.

Source: Yahoo Finance

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Adam

Economic

The September-quarter reporting season begins on Tuesday, 14 October, when JPMorgan, Wells Fargo and Citigroup unveil their third quarter (Q3) 2025 results. These three banking giants will set the tone for the wider financial sector.

Their shares have performed strongly in recent months, despite some recent weakness. This resilience reflects continued optimism about sector earnings and the strength of capital markets activity.

The banking sector has benefited from a robust economy and increased corporate activity throughout 2025. Investment banking fees have recovered as companies return to the M&A market and pursue capital raising opportunities.

Trading desks have also enjoyed a productive quarter, with elevated volatility in equity and fixed income markets providing opportunities for revenue generation. This combination of factors has positioned banks well heading into results.

Analyst expectations point to strong results

BofA Securities has raised its forecasts for several major banks ahead of Q3 results. The firm expects better-than-anticipated investment banking and trading revenues to drive stronger performance across the sector.

Citigroup's earnings per share (EPS) forecast has been lifted to $1.91, with analysts setting a target price of $115 for the stock. This represents a significant upgrade from previous expectations.

JPMorgan's forecast now stands at $4.92 per share, reflecting confidence in the bank's diversified business model and strong market position. Morgan Stanley and Goldman Sachs have also seen their price targets increased.

Other major banks including Wells Fargo and Bank of America have benefited from revised forecasts. The broad-based nature of these upgrades suggests sector-wide strength rather than isolated success stories.

What's driving the optimism?

Investment banking has staged a notable recovery in 2025, with M&A activity picking up as companies gain confidence in the economic outlook. This has translated into higher advisory fees and underwriting revenues.

Trading operations have capitalised on market volatility, particularly in fixed income and currencies. Banks with strong trading franchises have been able to generate substantial revenues from client flows and proprietary positioning.

Net interest income remains resilient despite expectations of rate cuts. Banks have managed their deposit costs effectively while maintaining lending yields, preserving margins better than many anticipated.

Capital markets activity has accelerated, with initial public offering (IPO) pipelines building and debt issuance remaining robust. This provides a supportive backdrop for investment banking divisions across the sector.

Key themes to watch in bank earnings

Net interest income trends will be crucial, particularly as the market anticipates further rate cuts. Investors want to understand how banks plan to manage margins in a declining rate environment.

M&A activity and deal pipelines will provide insight into future revenue visibility. Banks with strong backlogs of announced but unclosed deals should benefit in coming quarters.

Trading performance across asset classes will reveal which banks best capitalised on market opportunities. Strength in equities, fixed income and commodities trading will be scrutinised.

Capital deployment plans deserve attention as banks accumulate excess capital. Share buyback programmes, dividend increases and potential acquisitions will all be on the agenda as rate cuts approach.

Market sentiment and investor positioning

Market strategist Ed Yardeni notes the S&P 500 Diversified Banks index has reached a record high. This performance reflects record forward earnings expectations and investor confidence in the sector's outlook.

However, this strength raises questions about whether optimism is already fully priced into bank shares. Strong results may be needed simply to justify current valuations rather than drive further gains.

The recent pullback in some bank shares suggests profit-taking after a strong run. This could create opportunities for investors who believe the earnings strength will continue beyond Q3.

Sector rotation into financials earlier this year positioned many investors long banks ahead of results. The earnings season will test whether this positioning proves prescient or premature.

Understanding bank business models

Banks generate revenue through multiple channels, making them complex businesses to analyse. Net interest income from lending represents the traditional core, but investment banking and trading have become increasingly important.

Investment banking divisions advise on M&A transactions, help companies raise capital through equity and debt offerings, and provide strategic advisory services. These activities generate fees that are less capital-intensive than lending.

Trading operations act as market makers and take proprietary positions across asset classes. While potentially volatile, successful trading divisions can generate substantial returns during periods of market activity.

Asset management and wealth management units provide steady fee income and help diversify revenue streams. These businesses typically carry lower risk profiles than trading or lending operations.

Source: ig

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