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In its intensifying trade dispute with Washington, Beijing believes it has found a key point of U.S. vulnerability: President Trump’s obsession with the stock market, according to people familiar with Chinese policy discussions.

The Wall Street Journal with the report:

Chinese officials, including President Xi Jinping, are reportedly convinced the U.S. economy cannot withstand a prolonged trade war without sharp market losses. They view Trump’s heavy reliance on market performance as a political gauge, expecting that sustained financial turbulence could pressure him into concessions.

Beijing’s firm stance reflects that belief: Chinese negotiators have held their line since the April selloff that followed Trump’s announcement of “Liberation Day” tariffs, when markets tumbled after China’s immediate retaliation.

According to those briefed on China’s strategy, Xi is betting that the threat of another market downturn will ultimately push Trump to seek a truce at an expected summit between the two leaders later this month.

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The report underscores China’s confidence in sustaining its trade stance, suggesting any further tariff escalation could hit U.S. equities. Markets may react nervously if rhetoric intensifies ahead of the planned Xi–Trump summit.

Gotta say … thinking that Trump will fold is not exactly a revelation insight. Everyone’s been calling TACO since April!

This article was written by Eamonn Sheridan at investinglive.com.

China September CPI -0.3% y/y

• vs. expected -0.2%, prior -0.4%

CPI +0.1% m/m

• expected +0.2%, prior 0%

PPI -2.3% y/y

• expected -2.3%, prior -2.9%

For the PPT m/m 0%

more to come

This article was written by Eamonn Sheridan at investinglive.com.

The Westpac-Melbourne Institute Leading Index tends not to shift AUD around too much upon release.

AUD/USD is moribund around 0.6490.

From WPAC’s report:

• The six-month annualised growth rate in the Westpac-Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, nudged back up to +0.04% in September from -0.16% in August.

• Momentum remains subdued compared to start of the year.
• Mixed signals from components with a lack of direction overall.

This article was written by Eamonn Sheridan at investinglive.com.

• Trump cranks up the anti-China rhetoric again
• USTR’s Greer: China realizes it over-stepped
• Fed chair Powell: Future path of monetary policy driven by data and risk assessments
• Powell Q&A:A risk that slow pass-through of tariff start to look like persistent inflation
• More from Powell: Further declines in job openings might start to show up in employment
• IMF boosts 2025 global GDP forecast to 3.2% from 3.0%
• Lagarde says she cannot say how high the bar is for cutting rates further
• BOE’s Bailey: Today’s labour market data back my view of softening
• Fed’s Collins: It seems ‘prudent’ to cut rates further
• Li says China aims to “continuously form new growth points for expanding domestic demand,”
• Fed’s Bowman says she continues to see two rate cuts before year end
• US ambassador to NATO says a big Ukraine weapons announcement coming tomorrow
• Canada August building permits -1.2% vs +0.2% expected

Markets:

• Gold up $32 to $4142
• US 10-year yields down 2.3 bps to 4.02%
• WTI crude down $1.03 to $58.47
• S&P 500 down 0.2%
• JPY leads, AUD lags

It was a lively day.

Stock futures were down badly ahead of the open and sank even harder afterwards before finding strong support at Friday’s low. That’s where the rally started and it might have had something to do with CNBC announcing that US Trade Rep Greer would be on TV. The thinking was that he would be softening the US’s position and that’s exactly what he did as he said China realized it over-stepped. He floated some other positive points too and that added to the rebound, eventually taking stocks to strongly positive territory. The Russell 2000 hit a record, climbing more than 2%, in part due to strong earnings from Wells Fargo.

Of course, Trump tossed another hand grenade late, hinting at more retaliation against China for not buying US soybeans and starting a fight over cooking oil. That led to some rapid selling and somewhat of a soft close.

Powell, Bailey and Lagarde all spoke in a rare trio of top central bankers. None offered anything particularly market moving or insightful but it fill the gap left by the absence of US economic data. All of them were relatively upbeat on growth and Lagarde highlighted surprising resilience and that was exactly what we saw in the IMF forecasts, which were generally better than July, particularly for Japan.

Canada was an outlier as the IMF downgraded its forecast for this year and next by 0.4 pp each. That was underscored by a poor building permits report today and a downward revision. Despite that, the loonie was one of the strongest performers today as we await (expect?) some positive US-Canada trade headlines on aluminum, steel, energy and maybe more.

This article was written by Adam Button at investinglive.com.

China has formally begun levying a “special port fee” on vessels linked to the United States, opening a new front in its trade confrontation with Washington.

I posted on the new levy yesterday:

• China has officially begun levying port fees on US ships

Following up now, info derived from a Caixin report.

At 6 p.m. local time on Tuesday, the Matson Waikiki, a U.S.-flagged container ship carrying 4,870 twenty-foot equivalent units (TEUs), docked at Shanghai Port — becoming the first vessel to face the new levy. With a net tonnage of 30,224, the ship is subject to a charge of about 12.09 million yuan (US$1.7 million) under the fee schedule unveiled by Beijing earlier this month.

Chinese transport officials confirmed to domestic outlet Caixin that the vessel is liable for the new charge, although it remains unclear whether payment has been made. The fee targets ships “linked to the United States” and marks China’s latest retaliatory measure in response to Washington’s escalating trade restrictions.

Analysts view the move as Beijing signalling it can extend its countermeasures beyond tariffs and investment controls into the maritime and logistics domain, potentially raising shipping costs for U.S.-related trade flows through Chinese ports.

This article was written by Eamonn Sheridan at investinglive.com.

China’s walk along the tightrope of slipping back into deflation will continue today with data for September expected to show just that y/y, although m/m is expected to pick up.

Note, Reserve Bank of Australia Assistant Governor (Economic) Sarah Hunter will speak at the Citi Australia & New Zealand Investment Conference 2025 in Sydney at 10.30am local time

• 2330 GMT
• 1930 US Eastern time

This article was written by Eamonn Sheridan at investinglive.com.

Here we go again:

• Trump says China not buying US soybeans is an ‘economically hostile act’
• Says they are considering terminating business with China to do with cooking oil and other elements of trade as retribution
• We can easily produce cooking oil ourselves

Now we’re fighting over cooking oil?

This article was written by Adam Button at investinglive.com.

There is one area where everyone seems to agree:

1. The US is calling for China to boost domestic demand.
2. Today, the IMF called for China to boost domestic demand
3. China itself is trying to boost domestic demand.

In a speech on CCTV today, Chinese Premier Li Qiang said China should be “continuously forming new growth points for expanding domestic demand.” He also doubled down on a crackdown on curbing ‘disorderly competition’. That last line has boosted optimism in Chinese stocks but risks creating global inflation.

This article was written by Adam Button at investinglive.com.

Crude oil futures are settling down $0.79 or 1.33% and $58.70. The low price today reached $57 and 68 says that was the lowest level since May 6.

Looking at the 4 hour chart, the price decline from the October 9 high the price was testing its 100 bar moving average (blue line on the chart below), first saw the price break below a swing area between $61.45 and $61.94. More recently, the price has extended below another swing area between $59.55 says and $59.78. Stay below keeps the sellers more in control.

That area is now close resistance. On the downside, the low price for the year is up $55.15

This article was written by Greg Michalowski at investinglive.com.

Trump has been trying to arm-twist Spain into spending more on defense.

That came after Spanish Prime Minister Pedro Sanchez said he would not commit to the 5% NATO target, calling it “incompatible with our welfare state and our world vision,” while committing to 2.1%.

This article was written by Adam Button at investinglive.com.

There is an interesting article in The Telegraph that cites some western executives who have toured Chinese factories recently.

They also quoted a statistic that I think might be the most-important one in the world: China added 295K robots last year, the US added 34,000.

Fortescue Metals Group President Andrew Forrest:

“I can take you to factories [in China] now, where you’ll basically
be alongside a big conveyor and the machines come out of the floor and
begin to assemble parts,” he says.

“And you’re walking alongside
this conveyor, and after about 800, 900 metres, a truck drives out.
There are no people – everything is robotic.”

Greg Jackson, the boss of British energy
supplier Octopus.

“We visited a dark factory producing some astronomical number of
mobile phones”

“The process was so heavily automated that there
were no workers on the manufacturing side, just a small number who were
there to ensure the plant was working.

“You get this sense of a
change, where China’s competitiveness has gone from being about
government subsidies and low wages to a tremendous number of highly
skilled, educated engineers who are innovating like mad.”

Ford CEO Jim Farley from July:

“It’s the most humbling thing I’ve ever seen.”

“Their cost and the quality of their vehicles is far superior to what I see in the West.”

“We are in a global competition with China, and it’s not just EVs. And if we lose this, we do not have a future at Ford.”

There is a good chance the battle is already lost

This article was written by Adam Button at investinglive.com.

The S&P 500 has trimmed today’s decline to just 13 points from upwards of 90 points early in the day.

The latest catalyst was the USTR’s Greer saying that China realized it overstepped on rare earth controls. He also noted there were staff talks going on as recently as yesterday. It sounds like he was marched out to cool market nerves and that’s what he did.

Overall, I didn’t think the flavor of his comments was quite as optimistic as the headlines but the momentum is clearly up right now and Trump has shown that he will TACO at the earliest possible moment.

This article was written by Adam Button at investinglive.com.