“I see the future of Brazil as the future of the planet.” – Gilberto Gil
Chart of the Day
Good morning!
Shares in miners and producers of rare-earth elements sank yesterday, with companies like MP Materials (MP -0.46% ), Trilogy Metals (TMQ 1.01% ), Ramaco Resources (METC -2.41% ) and USA Rare Earth (USAR 0.28% ) slipping 7.4%, 16.7%, 2.6%, and 8.4% respectively. How quickly the sentiment reverses. It wasn’t that long ago that their shares were surging on news (and hopes) that the government would take an equity stake. (The federal government holds a 15% stake in MP Materials and a 10% stake in Trilogy.).
Market observers are attributing this reversal to anticipation that President Donald Trump and China’s Xi Jinping will reach a trade deal when they meet in person on Thursday on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in South Korea. Much of this expectation stems from comments by senior White House officials like Treasury Secretary Scott Bessent, who told NBC’s Meet the Press that “we have the framework for the two leaders to have a very productive meeting for both sides.”
Yet the U.S. might have Trump’s recent meeting with Brazil’s President Luiz Inacio Lula da Silva to thank for that newfound U.S.-China trade optimism – as well as the subsequent decline in rare-earth stocks.
The two met on the sidelines of the ASEAN summit in Kuala Lumpur, Malaysia on Sunday. U.S.-Brazil ties have been largely frosty through most of 2025, with Trump starting a trade war with Brazil on Liberation Day despite the latter being one of the few countries with which the U.S. consistently runs a trade surplus. That trade deficit amounts to roughly $410 billion over the past 15 years, according to Brazilian officials.
That trade war was largely motivated by Trump’s anger over the prosecution of Jair Bolsonaro, the former Brazilian president convicted of trying to orchestrate a coup d’etat and even assassinate the man who defeated him. One can hardly blame Lula for taking offense at Trump’s overt support of a rival who is believed to have tacitly approved his murder.
Yet ties between Trump and Lula – two leaders that each enjoy a great deal of charisma-driven popularity in their respective countries suddenly warmed this month—resulting in a face-to-face meeting last Sunday on the sidelines of the ASEAN summit in Kuala Lumpur.
That’s timely, and likely not coincidental. China’s biggest source of leverage in its current trade policy is its dominance in the mining and refinement of rare-earth elements and other critical materials. Brazil, along with Australia, represents one of the best hopes the U.S. has of counterbalancing that leverage. As a whole Brazil is estimated to hold the world’s second-largest rare earths reserves, with major deposits of neodymium, praseodymium, terbium and dysprosium – arguably four of the most important rare earth elements.
White House officials can talk all they want about the progress being made in negotiations with their Chinese counterparts, but even if or after a deal is reached, the temptation for Beijing to flex its power and backslide will always be present as long as the U.S. and its allies are heavily dependent on China for such essential resources. Deepening trade ties with countries like Brazil and Australia could play a major role in removing that temptation – for everyone’s benefit.
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“Uptober” remains intact, and there are positive catalysts this week as Fed FOMC Oct rate decision is Wed and on Thu Trump-Xi meet. As we have advised for the past few weeks, we want to buy any dips, even those triggered by earnings reactions.
Technical
Overall, I am surprised at the extent of the recent rally pushing up aggressively before the details of the coming earnings, Fed policy, and Trump/XI meeting are known. SPX has moved quickly to levels just below 6900, and this channel resistance has held since July. This makes close scrutiny important.
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Business
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Politics
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Overseas
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Of Interest
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| Date | Time | Description | Estimate | Last |
|---|---|---|---|---|
| 10/28 | 9:00 AM | Aug Case Shiller 20-City m/m | -0.1 | -0.07 |
| 10/28 | 10:00 AM | Oct Conf Board Sentiment | 93.35 | 94.2 |
| 10/29 | 2:00 PM | Oct 29 FOMC Decision | 4 | 4.25 |
| 10/30 | 8:30 AM | 3Q A GDP QoQ | 3 | 3.8 |
| 10/31 | 8:30 AM | Sep PCE m/m | 0.3 | 0.3 |
| 10/31 | 8:30 AM | Sep Core PCE m/m | 0.22 | 0.23 |
| 10/31 | 8:30 AM | Sep PCE y/y | 2.8 | 2.7 |
| 10/31 | 8:30 AM | Sep Core PCE y/y | 2.9 | 2.90511 |
| 10/31 | 8:30 AM | 3Q ECI QoQ | 0.9 | 0.9 |
| 11/3 | 9:45 AM | Oct F Oct S&P Manu PMI | n/a | 52.2 |
