American economy

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Rare earth stocks climbed in the US after Beijing tightened its control over these critical materials, used in the vast majority of electronic devices, from smartphones and cars to ballistic missiles.

Across the Atlantic, European markets opened in a mixed mood while the Middle East peace deal progresses, brokered by US President Donald Trump.

With investors also watching political uncertainty in France, the pan-European STOXX 600 was up around 0.1% at 11.45 CEST, and Paris’ CAC 40 also gained 0.1%.

Frankfurt’s DAX and London’s FTSE 100 both slipped 0.1%, after an earlier rise for the DAX.

“The FTSE 100 was stuck in the mud as the rest of Europe ploughed ahead at the end of the trading week,” said Russ Mould, investment director at AJ Bell.

“Strength in consumer stocks and utilities was offset by weakness in miners and healthcare,” he said — adding: “it was also notable that defence stocks were being sold down, including Babcock, which has rocketed this year.”

In other news, oil prices were down on Friday morning. The US benchmark crude cost around 0.4% less than at the previous close, and traded at $61.26 per barrel at around 11.45 CEST. The international benchmark Brent lost 0.49% and cost $64.90 per barrel at the same time.

Gold prices also rose after hitting new records recently, trading at $4,018.00 on Friday morning in Europe.

US futures were up slightly, the euro gained against the dollar at $1.1575, and the greenback slipped against the Japanese yen, to ¥152.7950. The British pound also fell against the dollar and cost $1.3290.

Rare earths companies gained overseas

As mining stocks led losses in Europe on Friday amid developments in Beijing, the STOXX Europe Basic Resources index shed 0.78%.

This follows a rally in the US, where rare earth stocks rose considerably after China announced that it would tighten control over its exports of these materials.

The country is dominating the market for rare earths. The world’s second-largest economy accounts for 70% of the global supply of these assets that are hugely significant for defence and technological infrastructure.

Following the news, investors in the US placed their hopes on American alternatives. US rare earth and critical mineral miners’ share prices surged on Thursday, partially due to market speculation that Washington will invest more in building out a domestic supply chain.

Many of these companies have seen their prices increase for months now, with several doubling or tripling since the beginning of the year.

USA Rare Earth Inc., a firm building a domestic rare earth magnet supply chain, gained nearly 15% on Thursday. Since January, it has risen 151%.

MP Materials Corp, an American rare-earth materials company headquartered in Las Vegas, Nevada, also gained more than 2.4% on Thursday, while it is up 341% since January.

Another company, Denver-based Energy Fuels Inc., gained 9.4%, bring its year-to-date rise to 284%.

NioCorp Developments, which benefits from Pentagon support, gained more than 12%, Rare Element Resources Ltd gained more than 10%, and Texas Mineral Resources Corp. gained 9.6% on Thursday.

Meanwhile, Australian rare-earth mining company Lynas Rare Earths lost nearly 3.8% in the Asian trade, and Australia’s Iluka Resources lost 3.22%.

Chinese Shenghe Resources, a partly state-owned rare earths mining and processing company listed on the Shanghai stock exchange, lost 5%.

Beijing’s measures mean that companies need to apply for a licence to export products containing certain Chinese-sourced rare earth metals.

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It’s not only European tourists traveling in the United States and finding themselves in front of closed museum doors or national park gates.

Because the US is so central to the global economy, European businesses could feel negative effects of a US government shutdown too.

In fact, they should get ready for a rough ride that will only become more painful the longer the gridlock in Washington lasts.

So, why should corporate Europe be worried about public employees on the other side of the Atlantic not being able to work?

Well, the shutdown halts or scales back many federal operations like providing loans or permits and disrupts the work of government agencies that provide oversight, slowing down economic activity.

What makes this more significant is its timing. This year, the US economy is already navigating slower growth, persistent inflation pressures and increasing financial insecurity.

The shutdown is adding to this insecurity and has the potential to trigger a chain reaction of economic consequences.

Take European trade businesses. Already rattled by the tariff chaos, they rely on consistent and predictable market conditions to plan their production, allocate resources and meet their customers’ needs.

Even a slight slowdown in economic activity would lead to lower US imports, which would reduce demand for European companies, whose growth, revenue and profitability would in turn be affected.

European imports arriving in America will meet less government staff in ports and customs who handle administrative and regulatory tasks associated with importing and exporting goods.

As a result, there will be delays which can extend the time it takes for goods to reach their destinations, disrupting delivery schedules.

The delays can have cascading effects on supply chains that rely on precise timing to function efficiently. This may lead to unexpected costs for expedited shipping and penalties for missed delivery deadlines.

In addition, there is the danger from a potential halt in export license approvals.

European companies need these approvals – or their renewals – to conduct their business operations in the US altogether.

“Companies will be frozen, they can’t get anything approved, no permits or licenses, can’t sell corporate debt in the US,” a lawyer in the business of negotiating transatlantic deals for multinational corporate clients told Euronews.

“A government shutdown sends home the people who execute regulations, but the regulations themselves remain – and remain to be complied with.”

This regulatory uncertainty can leave European exporters in a state of limbo, unsure of their ability to continue their activities with the US market in the short-term.

Look especially for sectors that rely on US demand such as machinery, automotive components or chemicals.

Those companies might see downward stock market swings as investors react to uncertainty in the US.

Speaking of financial markets. Prolonged uncertainty in the US could lead to rising interest rates on US government bonds, as investors would consider them to be higher risk.

That would lead to higher rates elsewhere in the world.

In Europe, for example, this could depress stock markets, increase the cost of financing public deficits, and reduce overall demand due to the higher cost of credit.

The rise in rates would increase the risk of default by over-indebted borrowers, and therefore of a financial crisis.

As the lack of a budget agreement in Washington would compromise the financing of US support for certain countries, the risks of geopolitical instability would increase, which would depress business investment and intensify the decline in demand already affected by inflation.

Economists estimate that a two-week US government shutdown would have a negative impact on EU GDP of €4 billion. If the shutdown lasted for 8 weeks, the impact would increase to €16 billion.

Whether it will really come to this is in the hands of politicians in Washington.

What is at stake is nothing less than America’s reputation as a global economic anchor of stability.