Powell’s hawkish signals after the Fed meeting pushed traders to pull back sharply on a near term rate cut, while an overnight Trump Xi agreement on rare earths and farm trade adds fresh complexity to trade dependent sectors. Short term, expect bond yields and the dollar to respond to Powell’s pushback and to central bank inaction in Europe and Japan. Over the longer term, the deal on rare earths and soybeans matters for supply chains in autos, defense and batteries, but tariffs and prior reversals mean the improvement may prove temporary across the US, Europe and emerging markets.

Market open preview: rates, yields and the dollar

Federal Reserve chair Jerome Powell sent a clear message that a December rate cut is not guaranteed. Traders had priced a December cut at 88 percent before the press conference. That probability fell to about 71 percent after Powell’s remarks according to market measures. Those moves suggest the session will start with upward pressure on Treasury yields and a firmer US dollar.

Expect short dated futures to be the most reactive. The Fed’s split was visible in projections and voting. The median September projection showed three cuts for the year, but the vote tally was thin. Ten of 19 officials saw three or more cuts, while nine saw fewer. That fragmentation matters for traders because it makes forward guidance less stable than headline median forecasts imply.

Globally, the ECB and the Bank of Japan held rates unchanged today. That places more focus on US policy for global capital flows. A stronger dollar could weigh on commodity prices and put pressure on emerging market assets that are dollar denominated. Conversely, higher nominal yields in the US tend to lift returns for global investors seeking safe yield, at least in the short term.

Equities and sector flows: who wins and who feels the squeeze

Rate sensitive equities will likely see the most immediate reaction. Technology and growth names face renewed scrutiny when the market trims the probability of cuts. That dynamic can widen the gap between momentum stocks and cyclicals. Meanwhile, financials may find support from higher expected rates because net interest margins respond to steeper short end curves.

At the sector level, industrials and materials tied to capital spending may trade on mixed signals. If higher yields stay in place, discount rates for future earnings rise which favors companies with nearer term cash flow. That is a factor for smaller industrials and certain domestic oriented sectors in the US and Europe. In addition, defensive sectors such as consumer staples and utilities often reprice when rate expectations move, so expect intraday rotation as traders reweight exposures.

Commodities and global trade: rare earths, soybeans and the tariff hangover

The headline from Busan was a one year truce on rare earth exports and a renewed purchase pledge for soybeans. China controls key processing and export capacity for rare earths, which are essential for magnets, batteries and critical defense components. The truce reduces acute supply risk for now, but historical precedent suggests these accords can unravel quickly.

Tariffs remain a central constraint. The announcement did not remove a 47 percent levy on a swath of Chinese exports and it left de minimis tariffs in place for small parcel imports. Those levies translate into tens of billions of dollars in higher costs for US businesses and consumers. Market participants will watch commodity linked equities such as miners and agricultural names for trade related re pricing, while specialty materials producers may see more structural demand expectations for investment in non Chinese processing capacity.

For agriculture, any renewal of Chinese purchases supports prices for soybeans and related inputs. That helps farm equipment suppliers and logistics providers in the US. However, prior deals have often delivered short lived relief. If this truce endures for the nominal term noted, it gives time for alternative supply chains to scale up, but the immediate market reaction will hinge on whether buyers actually follow through with shipments and contracts.

Risks to watch during the trading session

Central bank language will remain the principal market driver. Powell’s emphasis on differing views inside the Fed means headline releases of inflation or payroll data could swing sentiment more than usual. Market positioning is one risk. Futures pricing tightened quickly after the meeting, which leaves room for volatility if economic prints deviate even slightly from expectations.

Geopolitical and trade headlines will also be monitored closely. The one year truce on rare earths reduces an immediate supply shock scenario, but the history of stop start agreements means investors may price in renewed event risk. If China or the US takes follow up steps that alter duties or export rules, commodity and industrial shares could gap at the open.

Finally, be aware of cross market effects. A stronger dollar and higher US yields can pressure emerging market equity and bond markets that have dollar liabilities. European and Japanese markets, which are holding policy steady, will react through currency channels and foreign investor flows into and out of local bonds.

This session will likely be data sensitive and news driven. Traders should watch Treasury swings, currency moves and sector rotation for clues about how the combination of Fed hawkishness and a tentative China trade truce is being priced across asset classes in the US, Europe, Asia and emerging markets.