Weekly Espresso

US markets closed nearly 2% down for the week after concerns over valuations of AI & Mag 7 stocks came to a head. Over $500bn was wiped off the value of AI chipmakers, with the bosses of Goldman Sachs and Morgan Stanley speaking of fears about an imminent correction. The sustained US Government shutdown, nearing the record for the longest ever, added to these pains, with increased instability and uncertainty in US markets. UK and European markets also suffered from the sell-off, with UK markets perhaps struggling with the uncertainty of the upcoming budget.

During Trump’s tour of Asia, Trump and Xi Jinping agreed to suspend China’s rare earth export controls in return for the US cutting the “fentanyl tariff” from 20% to 10%. China have also committed to buying a “massive” amount of American farm products including soybeans.

Trump rated the talks as a “12 on a scale of 1 to 10” but nothing has been signed yet…

The 64-year-old won a clear majority on Tuesday – 237 votes in the powerful Lower House and another 125 in the Upper House – as leader of the ruling Liberal Democratic Party (LDP). Her economic views align closely with those of former Prime Minister Shinzo Abe, who promoted a reflationary policy framework known as “Abenomics.” She has long called for aggressive government spending to boost Japan’s economic growth rate and criticized the Bank of Japan for tightening monetary policy.

On Tuesday, the Governor of the Bank of England (BoE), Andrew Bailey joined the growing number of finance leaders worried about the AI boom and the inflated value of tech companies. In his letter to other G20 finance ministers and bank governors he said, “While most jurisdictions have seen a rebound in financial markets in recent months, the resulting asset valuations could now be at odds with the uncertain economic and geopolitical outlook, leaving markets susceptible to a disorderly adjustment.”

The next day, the International Monetary Fund (IMF) echoed Bailey’s comments when it released its latest World Economic Outlook report…

All US markets fell sharply on Friday following Trump’s threat to impose an additional 100% tariff on China from as soon as November.

Earlier in the week, China added five new rare earth minerals (holmium, erbium, thulium, europium and ytterbium) to its control list. This takes the total number of restricted minerals to twelve. China has effectively developed a monopoly on rare earth minerals, and these additions will have a major impact on the US…

As expected, in a week where US President Trump reposted bizarre and offensive AI videos of House Minority Leader Hakeem Jeffries, promoted a “med-bed” conspiracy video, and announced plans to use “dangerous cities” as “training grounds” for the US military, he failed to stop a US government shutdown during last week’s negotiations.

It’s the first US government shutdown since the 35-day shutdown in December 2018…