by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with new research that helps confirm our belief that China’s growing comprehensive power — political, military, economic, and technological — is giving it much more geopolitical leverage. We next review several other international and US developments that could affect the financial markets today, including the latest on the war in Iran and a U-turn by S&P Global on when it will include the upcoming SpaceX shares in the S&P 500 index.

Global Pharmaceutical Industry: New research by the Council on Foreign Relations has found that China dominates the global supply of key medicines and pharmaceutical inputs nearly as much as it dominates the global supply of critical minerals such as rare earths. That validates our view that Beijing has probably developed multiple sources of economic leverage over the US and its allies.

• Beijing could therefore restrict its exports of key products to force the US or other countries to bow to Chinese demands, as it did with critical minerals during the US-China tariff spat in 2025.
• Even if the US and other countries successfully build their own critical mineral mines and processing facilities in the coming years, the analysis suggests China will still have important tools to impose economic pain on its adversaries.
• Coupled with its other sources of increased power, such as China’s rapidly growing arsenal of nuclear weapons, Beijing now has a level of total, comprehensive power that is at least starting to rival that of the US. In turn, that will likely undermine US companies’ market opportunities going forward.

United States-Israel-Iran: Islamic militant group Hezbollah yesterday rejected the US-brokered ceasefire deal between Israel and Lebanon, which was announced on Wednesday. The deal was aimed at stopping the Israeli attacks on Iran-aligned militant groups in Lebanon, which Israel launched in conjunction with its participation in the US war against Iran. Stopping the attacks on its proxies in Lebanon has been a key Iranian demand in order to accept a peace deal with the US. Therefore, the development provides added reason to think the Iran war will continue.

United Kingdom: As long anticipated, Manchester mayor Andy Burnham yesterday confirmed that he will try to replace Keir Starmer as prime minister if he wins a parliamentary by-election on June 18. Labour Party rules require that anyone launching a leadership contest must be a member of parliament. However, the district Burnham will be contesting has not traditionally voted Labour, so it is still uncertain if he will have the chance to unseat the unpopular Starmer.

European Union-China-India: In a new survey by The Conference Board and the European Round Table for Industry, only 34% of corporate chief executives in the EU were optimistic that business conditions in China would improve in three or more years, while 34% were neutral and 23% were pessimistic. In contrast, 70% of the respondents were optimistic or very optimistic about conditions in India, with only 4% pessimistic.

• The figures underscore how India is increasingly being seen as a more attractive place to do business versus China.
• In turn, that could suggest better prospects for Indian stocks as well.

India: To shore up the depreciating rupee, New Delhi today said it will end a 12.5% capital gains tax on government bonds held by foreigner institutions, allow foreigners to buy government bonds with maturities up to 40 years (compared with 10 years currently), and raise the current 10.0% cap on foreign ownership of publicly traded Indian companies. The investor-friendly measures are aimed at offsetting the downward pressure on the rupee that has resulted from the war in Iran and the associated spike in India’s oil import bill.

US National Security: The Financial Times yesterday revealed that AI-giant Anthropic is already making its powerful Mythos model available to the National Security Agency to launch offensive cyberattacks against US adversaries. The company is helping the NSA despite its continuing dispute with the Pentagon over what its AI models can be used for. The news suggests Mythos is so capable that the Pentagon can’t pass up the opportunity to use it despite the continued dispute.

US Stock Market: In a statement yesterday, S&P Global said it will abandon its earlier plan to change its rules for inclusion in the S&P 500 to quickly move SpaceX into the key stock index once it completes its initial public offering. By maintaining its current rules, SpaceX will have to go through a one-year seasoning period before it becomes part of the S&P 500. In turn, that will mean that index-fund investors won’t automatically have exposure to the company until sometime in 2027.

US Private Credit Industry: Investment giant Blackstone yesterday said investors in its large BCRED private credit fund had requested to redeem 10% of the fund’s assets during its most recent quarter, up from 8% in the previous quarter. The company said it would therefore reverse its previous lenient policy and start enforcing a 5% cap on quarterly withdrawals going forward. The clamp-down apparently eased investor concerns about a mass wave of redemptions, allowing the firm’s share price to jump 7.5%.

US Banking Industry: In an exclusive new article yesterday, the Wall Street Journal said JPMorgan Chase, Bank of America, Wells Fargo, and other large commercial banks are planning to launch a tokenized deposit network to help them compete for assets as the White House pushes to reduce restrictions on cryptocurrencies. Importantly, the new tokenized deposit network would allow real-time, 24/7 settlements.

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