TL;DR

U.S.-China rare-earths deal signed; dollar slumps on Fed uncertainty; global equities, Nikkei rally.

Highlights

• U.S. and China signed a rare-earths trade deal, resuming shipments and easing select export curbs, but 145% U.S. tariffs on Chinese goods remain2.
• Trump confirmed the China deal and signaled a U.S.-India trade accord is near; further agreements with India and the EU are possible soon12.
• The U.S. dollar hit a three-year low after Trump criticized Fed Chair Powell and suggested a leadership change, raising odds of a near-term Fed rate cut3.
• Global equities rallied: Nikkei 225 surpassed 40,000 on chip sector strength and easing tariff concerns; S&P 500 and Nasdaq hit new highs43.
• Chinese industrial profits fell 9.1% in May, reversing gains, as tariffs and weak demand weighed; U.S. chip curbs delayed DeepSeek’s AI rollout in China1011.
• SoftBank raised its OpenAI investment to $32 billion, intensifying capital flows into AI and semiconductor sectors18.
• U.S. auto tariffs cut UK car exports to the U.S. by 55% in May and triggered supplier layoffs; supply chains remain disrupted17.
• China’s Iranian crude imports reached a record 1.8 million b/d in June, amid expectations of possible U.S. sanctions relief; Brent traded near $689.
• Banxico cut rates 50bps to 8% amid growth concerns; U.S. sanctioned three Mexican banks for money laundering, prompting regulatory intervention1413.
• South Korea tightened debt controls after an emergency meeting to address high household leverage and weak domestic demand15.
• NATO members agreed to raise defense spending to 5% of GDP; Estonia’s possible hosting of nuclear-capable NATO jets drew Kremlin warnings165.
• Bhutan disclosed $1.3 billion in Bitcoin holdings, equaling 40% of its GDP20.

Commentary

The U.S.-China rare-earths agreement provides targeted relief for high-tech sectors dependent on critical minerals, but the broader tariff regime remains unchanged, continuing to pressure Chinese industrial profits and global supply chains210. The U.S. administration’s focus on securing further trade deals with India and the EU signals potential for incremental de-escalation in select sectors, though details remain sparse12.

Currency markets reacted sharply as the dollar dropped to a multi-year low following President Trump’s open criticism of Fed Chair Powell and hints at a leadership change3. This has increased market expectations for a Fed rate cut as early as July, supporting a rally in global equities and driving capital into risk assets, particularly in tech and semiconductors34. The Nikkei’s move above 40,000 underscores renewed foreign and domestic interest in Japanese equities, buoyed by chip sector momentum and easing tariff fears4.

Chinese industrial data highlight ongoing challenges: profits for major firms slumped in May, and U.S. chip export controls are slowing domestic AI development, as seen in DeepSeek’s delayed rollout1011. Meanwhile, SoftBank’s expanded OpenAI investment and continued chip sector deals reinforce the capital shift toward U.S. and Japanese tech, while European regulators increase scrutiny of Chinese AI apps1812.

Energy markets remain sensitive to geopolitical developments. China’s record Iranian crude imports, alongside ships in the Strait of Hormuz spoofing identities to avoid conflict, point to persistent supply risks919. Any escalation in the Middle East or further shifts in U.S. sanctions enforcement could quickly impact oil prices and shipping919.

Emerging markets face policy dilemmas: Banxico’s rate cut reflects growth concerns amid external shocks, while South Korea’s tightening of debt controls aims to address domestic vulnerabilities1415. U.S. sanctions on Mexican banks highlight ongoing financial crime risks but are not seen as a systemic threat13. NATO’s agreement to boost defense spending and Estonia’s possible hosting of nuclear-capable jets add to regional security tensions, relevant for defense and energy sectors165. Bhutan’s significant Bitcoin reserves are notable for crypto market watchers but have limited immediate macro impact20.