The Morning Edge: US, China Strike Rare Earths Deal as Economic Growth Falters Under Tariff Strain

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Global Sentiment: Risk-on
Factors: Fed Rate Cut Optimism

TODAY’S WATCHLIST
 -US May PCE data
 -EU Leaders Summit  

THE BIG STORY
The United States and China have reached a framework agreement to resume critical rare earth shipments, marking a key step in cooling trade tensions but questions remain about its durability. Announced by the White House late Thursday, the framework follows weeks of negotiation since last month’s Geneva talks and includes mutual commitments: China will resume deliveries of rare earth materials, and the US will roll back some countermeasures. Commerce Secretary Howard Lutnick said the agreement “builds momentum,” though it still awaits formal approval from Chinese President Xi Jinping. President Trump hailed the deal as “done,” but did not confirm whether looming tariffs up to 125% scheduled for August 12 would now be shelved.

The breakthrough comes against the backdrop of fresh economic warning signs. The US economy shrank more than previously estimated in the first quarter, with GDP contracting at a 0.5% annualised rate, the Commerce Department reported. Consumer spending, the backbone of economic growth was sharply revised downward, highlighting the drag from Trump’s aggressive tariff policies. While the rare earths deal could calm global supply chain jitters, the data underscores a deeper toll the trade war continues to exact on domestic growth.

DATA
US jobless claims fell by 10,000 to a seasonally adjusted 236,000 in the week ended June 21, beating forecasts of 245,000. However, continued unemployment benefit rolls rose to their highest level in three and a half years, signalling that while fewer people are losing jobs, finding new ones is increasingly difficult amid growing economic uncertainty. Businesses appear cautious about hiring, raising concerns that the jobless rate could tick up in June.

In other data, US durable goods orders surged 16.4% in May, led by a sharp jump in aircraft demand, offering a bright spot in an otherwise mixed economic picture. However, the goods trade deficit widened 11.1% to $96.6 billion, as export weakness persisted, adding to concerns about slowing global demand and the drag of trade tensions.

WHAT HAPPENED OVERNIGHT
US stocks closed higher on Thursday, with the S&P 500 and Nasdaq inching closer to record highs as the Israel-Iran ceasefire held and recent economic data bolstered hopes of a rate cut by the Federal Reserve later this year. The broad-based rally pushed all three major US indexes into positive territory for the week. Bank stocks led the gains after the Fed proposed easing leverage rules, potentially reducing capital requirements for large banks. The S&P 500 banks index climbed 1.6%. Copper prices surged to a three-month high, lifting Freeport-McMoRan by 6.8% and Southern Copper by 7.8%. Despite forecasting strong Q4 revenue, Micron dipped 1.0%.

The yield on the 10-year US Treasury note slipped below 4.29% on Thursday, marking its lowest level since early May, as expectations grew for a more dovish Federal Reserve. Markets responded to reports that President Trump may announce his pick for the next Fed Chair by September or October, effectively installing a “shadow” chair who could signal a shift toward looser monetary policy.

The US dollar fell sharply on Thursday, hitting multi-year lows against major peers as traders ramped up bets on deeper rate cuts by the Federal Reserve. The euro climbed 0.51% to $1.1719 after reaching $1.1744, its highest level since September 2021, while sterling surged 0.62% to $1.3748, touching levels last seen in October 2021. The Swiss franc soared to a 10.5-year high at 0.799 per dollar, and the dollar dropped 0.72% to 144.2 yen. The dollar index slid to 97, its weakest since February 2022, as speculation grew that the Fed could ease more aggressively.

Brent crude oil prices edged higher on Thursday, with Brent crude rising over 1% to nearly $68.50 per barrel, as markets weighed mixed signals surrounding US-Iran tensions and ongoing supply risks. Despite US airstrikes, Iran's enriched uranium stockpile reportedly remains largely intact, and Tehran has passed a law suspending cooperation with the UN nuclear watchdog. President Trump denied speculation that Iran moved nuclear material ahead of the strikes, declaring the conflict “over,” though he reaffirmed his intent to target Iranian oil revenues.

Day’s Ledger
Economic Data

• US May PCE Price Index
• US Baker Hughes Oil Rig Count
• India Foreign Exchange Reserves for June 20 week

Corporate Actions

• Bannari Amman Spinning Mills to consider fund raising
• Capri Global Capital to consider fund raising
• Concord Drugs to consider fund raising
• Indian Infotech to consider rights issue
• Innovana Thinklabs to consider fund raising
• Satin Creditcare to consider fund raising

Policy Events

• EU Leaders Summit  
• US FOMC Member Williams speaks

TICKERS

• BIOCON to acquire 1,125 optionally convertible debentures worth $198.5 million in Biocon Biologics from Goldman Sachs AIF schemes; final value may vary based on timing.
  CREDITACCESS GRAMEEN MD Udaya Kumar Hebbar steps down after term ends; continues as non-executive director; Ganesh Narayanan appointed interim MD & CEO, pending RBI approval.
• HCL TECHNOLOGIES expands Salesforce partnership to fast-track agentic AI adoption in sectors like finance, healthcare and retail; aims to automate and optimise task workflows.
• HITACHI ENERGY bags Power Grid order for 30 single-phase 765-kV transformers; units to be built in Vadodara and delivered as part of national network expansion.
• JSW STEEL seeks open court hearing on Bhushan Power ruling; urges SC to stay liquidation, citing ₹193.5 billion investment and multi-year turnaround since 2021.
• NTPC to begin commercial operations of 660 MW unit at Barh Super Thermal Power Project from Tuesday; standalone capacity to touch 60.98 GW, group at 82.08 GW.
• PREMIER ENERGIES commissions 1.2 GW TOPCon solar cell line in Hyderabad; targets 8.4 GW cell and 11.1 GW module capacity by June 2026 as part of scale-up.
• SAGILITY board clears renaming from Sagility India Ltd. to Sagility Ltd.; subject to shareholder and regulatory approvals including Ministry of Corporate Affairs clearance.
• ULTRATECH CEMENT commissions second grinding unit at Maihar, adding 1.8 MTPA capacity; total domestic cement capacity at 186.86 MTPA, overseas capacity unchanged at 5.4 MTPA.
• VEDANTA RESOURCES borrows $600 million from global banks; loan covenants restrict Vedanta and Hindustan Zinc from asset sales, investments, or dividends without lender consent.

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