Both United States and China, while attempting to resolve its ongoing trade war with each other, is simultaneously taking steps that could escalate tensions. In a significant move, President Donald Trump signed an $8.5 billion (approximately Rs 75,000 crore) rare earth project agreement with the Australian government at the White House. The project aims to challenge China’s dominant position in the global rare earth market. Trump signed the agreement alongside Australian Prime Minister Anthony Albanese.
The initiative reflects Trump’s strategy to create a rare earth supply chain that bypasses China. Currently, China controls nearly 95 per cent of the global rare earth supply chain, which is crucial for sectors such as defense, electric vehicle manufacturing, solar energy, and electronics. The United States, the European Union, and other countries remain heavily dependent on Chinese rare earth exports. As part of the project, US companies will invest in Australia to establish a new rare earth supply chain. A notable initiative under this agreement is a trilateral project involving the United States, Australia, and Japan. Additionally, the U.S. plans to set up a gallium refinery in Australia with an annual production capacity of 100 metric tons. Gallium is a critical component for high-tech industries, including semiconductors and defense equipment.
Alongside the agreement, Trump issued a stern warning to China. He stated that severe consequences would follow if Beijing does not compromise on rare earth negotiations or attempts to derail ongoing trade talks. Trump had previously announced a 100 per cent additional tariff on Chinese products, effective from November 1. Now, he has threatened to raise this tariff to 155% if China continues to resist concessions. Trump also expressed his intention to meet Chinese President Xi Jinping in South Korea in the near future. The global markets have shown cautious optimism following these developments. U.S. stock futures inched higher, with the Dow Jones Industrial Average rising 0.1 per cent, while the S&P 500 and Nasdaq remained largely unchanged. Japan’s Nikkei index surged 1.5 per cent, breaking another record, as the Takaichi administration appeared to regain investor confidence. European stocks also performed well, with defense-related shares rising up to 8 per cent, buoyed by ongoing geopolitical tensions, including the Israel-Hamas and Ukraine-Russia conflicts.
India gears up for Muhurat trading amid positive market trends
In India, investors are preparing for ‘Muhurat trading,’ scheduled today at noon to coincide with the Diwali festival and the beginning of the Samvat 2082 year. Muhurat trading is considered an auspicious period for financial activities such as investments, business launches, and purchases of property, vehicles, and jewelry. The session begins with a pre-open period from 1:30 pm to 1:45 pm, followed by one hour of normal trading. A final window for trade modifications will remain open until 2:55 pm. Historically, the Sensex has risen in 10 out of 13 Muhurat trading sessions from 2012 to 2024. Last year, in the 2024 Muhurat session, the Sensex climbed 335.06 points (+0.42 per cent) to 79,724.12, while the Nifty gained 99 points (+0.41 per cent) to 24,304. The current market trend is positive, with the Sensex at 83,952 and the Nifty at 25,709.
Corporate earnings and major financial moves are also influencing the Indian markets. Commodity markets are reacting to the combination of excess demand in equities and trade tensions between the US and China. Oil prices have declined, with Brent crude at $60 per barrel and WTI crude at $57 per barrel. Conversely, gold prices are on the rise, supported by a weakening US dollar, geopolitical uncertainties, and the ongoing trade war. The international gold price increased by $91 per ounce, reaching $4,341 this morning. In India, gold prices are expected to trend upwards today, reflecting global market movements.
Overall, the interplay of US-China trade dynamics, strategic investments in rare earths, and domestic market optimism ahead of Muhurat trading is shaping global and Indian financial landscapes. Investors will be closely watching both international developments and local market movements as they navigate this period of uncertainty and opportunity.
