China’s been playing hardball on trade. Now we may know why.

Earlier this month, China landed its biggest trade war blow yet, placing extreme export controls on its critical rare earth minerals industry, a move that gives it more leverage in the seemingly never-ending negotiations for a broader trade deal. The hardline tactic came just before new economic data from Beijing late Sunday showed the Chinese economy grew at its slowest pace in a year in the third quarter, suggesting that the trade war might be taking its toll.

Playing a Trump Card

By most estimates, China controls roughly 70% of the world’s rare earth minerals mining capacity and 90% of its production capacity. Stricter export controls on the minerals could quickly cripple US, as well as global, supply chains for everything from automobiles to military equipment. The threat to impose them comes just as the impact of the trade war is starting to become clear:

• China’s GDP growth fell to 4.8% in the third quarter, down from 5.2% in the second quarter. Exports to the US fell 27% year-over-year, though exports to the European Union increased 14%, exports to Southeast Asia increased 15% and exports to Africa increased 56%; exports were up more than 8% overall year-over-year, the government said.
• The bigger trouble has been the downstream effects at home. Retail sales grew 3% year-over-year in September, a 10-month low, while the country’s property sector flounders.

Clap Back: Sparking economic growth at home will likely be crucial for leaders in Beijing, who gathered on Monday to start hashing out the details of the nation’s next “Five-Year Plan,” which will be released in March. On the other side of the trade-war battle lines, Washington is etching out a more China-free future. On Monday, US and Australian leaders agreed to a deal to shore up rare earth — yes, that again! — supply chains. The agreement comes after President Trump said Sunday that hashing out a rare earth minerals deal is at the top of his bargaining wish list with China, along with negotiating new Chinese purchases of US soybeans and securing protections for Taiwan. Treasury Secretary Scott Bessent has said the talks between the US and China will resume this week in Malaysia, while President Trump and President Xi Jinping have tentative plans to meet next week at the Asia-Pacific Economic Cooperation summit in South Korea. The 90-day suspension of higher US tariffs on Chinese goods is set to expire on November 10.

It’s Apple season, and not just in upstate New York. Apple shares climbed Monday after Counterpoint data found the iPhone 17 lineup outsold the iPhone 16 by 14% in the US and China in its first 10 days. The new iPhone went on sale last month, and CEO Tim Cook visited China last week to promote its debut (and get a custom Labubu, of course).

Apple’s shares closed yesterday at their first record high of the year. The iPhone-maker’s market cap climbed above $3.9 billion, making it the world’s second-most valuable company (only AI giant Nvidia ranks higher) and putting it on a path to become the third company to pass the $4 trillion mark.

Time for an Upgrade

It’s sweet news for a company that’s had a rotten year, with rising concerns over AI-related delays and tariffs, especially in China and India, where it makes most of its products. Investor appetite started to grow in August, when Apple promised to invest $100 billion in US manufacturing. Now, hype’s building on hopes that Apple’s new iPhone will be on everyone’s holiday wish list, both in the US and China:

• Sales of Apple’s smartphones, which make up more than half of the tech giant’s annual revenue, dipped 2% in the 2023 fiscal year and stayed flat last year. While some analysts say sales are picking up now because consumers like the iPhone 17’s new features, others say it’s simply time for an upgrade since many users bought their last iPhone during the pandemic.
• While Apple’s blue bubbles dominate chats in the US, its smartphone shipments are second to Vivo in China, according to IDC data for the third quarter released last week. It’s a tight race between the top four, too, unlike in the US, where Apple holds the majority of market share.

Harvest Time: Apple is expected to release its earnings through the end of September on October 30, which means its next report will include the first few weeks of iPhone 17 sales. Though Apple no longer discloses the number of products it sells, investors will be eyeing its revenue for signs the iPhone is flying off shelves. This could be just the beginning of Apple’s hot streak, with Visible Alpha data predicting iPhone sales will grow 4% this fiscal year and nearly 5% in 2026. Or not: Jefferies recently downgraded Apple shares, citing “excessive expectations” for the iPhone 17.

Last week, the top bankers at Citigroup, Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley earned their weight in Patek Philippe watches and Gucci loafers with a run of strong earnings reports.

Despite the upbeat financial news, however, all anyone could think about was Blattodea. That’s the scientific name for cockroach. The reason? JPMorgan CEO Jamie Dimon’s musings about potential “cockroaches,” like the collapsed auto dealer and financier Tricolor and auto parts company First Brands, lurking in the $3 trillion global private credit market. Next came disclosures by two regional lenders that set off a mini-panic about bad loans on the books of small- and medium-cap banks. One of those two banks reported yesterday and, thankfully, a can of Raid wasn’t necessary to thwart a contagion.

Better Than Expected

It was regional lender Zions Bancorp that rattled markets on Thursday when it disclosed a $50 million charge related to two bad loans and sued the managers of the group of funds, known as Cantor Group, responsible for them. Another regional lender, Western Alliance, disclosed exposure to Cantor and said it sued the group in August (financial services giant Cantor Fitzgerald would like you to know it has nothing to do with this).

The disclosures came weeks after Tricolor and First Brands collapsed in August, with a credit fund of investment bank Jefferies holding a roughly $715 million exposure to the latter. Investors, still rattled by the regional bank failures of the 2023 banking crisis, looked at all of this and let out a Scooby Doo-style “ruh roh.” Immediately, there were concerns about additional problematic loans. Fears were particularly tied to banks’ increasing exposure to private credit, a sector of non-bank financial entities that’s far less regulated and requires limited risk disclosure. (An IMF report earlier this month estimated US and European banks have some $4.5 trillion of exposure to non-bank financial entities, roughly 9% of their combined loan books.) Bank stocks tumbled, with the gravitational pull dragging on even large-cap lenders. The mood was better on Monday when, rather than give cause for a Shaggy-style “zoinks,” Zions’ earnings projected calm:

• The Salt Lake City-based lender reported a third-quarter profit of $221 million after trading hours on Monday, up 8.3% from $204 million a year earlier and topping Wall Street’s expectations. Improving income from interest more than offset the bad loans.
• Another regional lender that reported Monday, Illinois-based HBT Financial, also beat expectations with a net income of $20.5 million. The KBW Regional Banking Index rose 2.3%, suggesting market concerns have eased for now, while Zions Bancorp shares climbed 4.6%.

Feeling Exposed: “While the overall credit market remains stable, the divergence between investment-grade and leveraged credit is becoming increasingly pronounced,” Lawrence Gillum, the chief fixed income strategist at LPL Financial, said in a note Monday. He flagged data from Cornerstone Research showing 17 “mega” bankruptcies, those involving firms with more than $1 billion in assets, in the first half of 2025. That’s the most for any six-month period since the COVID pandemic. “Years of high interest rates, which are good for investors but not so great for borrowers, are clearly weighing on some companies,” he added.