Trump-Xi, Fed Cuts, and Big Tech Earnings: What You Need to Know

The markets barely had a moment to catch their breath today, as geopolitical developments and economic data converged with Big Tech earnings to create a volatile session.

First, the Trump-Xi summit.

U.S. President Donald Trump’s meeting with Chinese President Xi Jinping in South Korea on Thursday yielded a noteworthy thaw in trade relations. Trump announced a one-year agreement with China on rare earths, a critical component in technological manufacturing, and reduced fentanyl-related tariffs on Beijing to 10% from 20%, effective immediately. In a reciprocal gesture, China will reportedly resume purchases of soybeans and other agricultural products from the U.S., offering a potential boost to the struggling agricultural sector.

Then, the Fed’s interest rate decision.

The U.S. Federal Reserve, as widely anticipated, trimmed interest rates by 25 basis points. However, Fed Chair Jerome Powell tempered expectations of a further rate cut in December, stating that it “is not a foregone conclusion.” This cautious stance reflects the Fed’s data-dependent approach and ongoing assessment of the economic landscape, particularly in light of persistent inflationary pressures.

Finally, Big Tech earnings came under scrutiny.

While Alphabet, Meta, and Microsoft all delivered earnings reports that exceeded analyst estimates, the focal point for investors was their projected capital expenditure (capex). Each company signaled an intention to increase spending beyond previous projections, suggesting that capex growth in 2026 could surpass this year’s rate. A significant driver of this investment is the escalating demand for artificial intelligence (AI) services, indicating a strategic commitment to maintaining a competitive edge in the rapidly evolving AI landscape. This development should assuage fears of the dot-com bubble repeating, further supported by Powell’s assessment that AI is fundamentally different and a major source of GDP growth in coming years.

That concludes today’s recap. Take a moment to pause – Apple and Amazon are set to report next.

Trump and Xi meet in South Korea. In a landmark meeting after years of strained relations, President Trump agreed with China on a one-year rare earth and critical mineral agreement. Fentanyl-related tariffs were also halved to 10% from 20%, encouraging China to resume U.S. soybean purchases.

Fed cuts rates by 25 basis points. The U.S.’ benchmark interest rate now sits in a range of 3.75%-4%. Unusually, the decision had two dissenters: Stephan Miran wanted a half-point cut, while Jeffrey Schmid voted to hold steady with no cuts.

Tech titans report earnings. Alphabet, Meta and Microsoft all released their earnings reports after trading ended on Wednesday, beating Wall Street expectations. AI continues to be a key catalyst for sales growth across each of these industry giants.

U.S. markets traded mixed Wednesday. The Nasdaq Composite showed the only upward trend, with Asia-Pacific markets falling amid the Trump-Xi meeting. Japan’s Nikkei 225 edged up, however, as the Bank of Japan decided to hold rates.

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Trump’s rare earth deals target China’s dominance — here’s why change won’t come soon

President Trump’s recent efforts to diversify the rare earth supply chain have gained momentum through strategic partnerships with Australia, Malaysia, Cambodia, and Japan. These deals aim to reduce reliance on China, which currently dominates the global rare earth market. Rare earth elements play a crucial role in the production of batteries, automobiles, defense systems, and computing chips, making their supply a matter of national security and economic stability.

While these agreements are poised to inject much-needed investment into the industry and offer a long-term challenge to Beijing’s market control, industry analysts caution that establishing alternative rare earth supply chains will be a costly and time-consuming endeavor. The upfront capital expenditure required to develop new mining and processing facilities, coupled with the environmental regulations associated with rare earth extraction, could present significant hurdles. Moreover, China’s vertically integrated rare earth industry, encompassing mining, processing, and manufacturing, provides a cost advantage that will be difficult to replicate quickly.

— Anniek Bao