In focus today

In the euro area, attention shifts to August unemployment data. While the labour market has remained robust with low unemployment, employment growth has moderated lately. We expect the unemployment rate to remain unchanged at 6.2%. Additionally, the final manufacturing PMI is due today. With much of Europe on holiday in August, late responses not captured in the preliminary release could influence the final print. This is particularly important as the flash estimate surprised significantly on the upside.

This week offers plenty of key data, including euro area inflation on Tuesday, Sweden’s flash inflation figures on Thursday, which will be closely watched and key to near-term Riksbank rate decisions. The week concludes with the US jobs report on Friday.

Economic and market news

What happened overnight and over the weekend

In China, PMIs for August released this morning and yesterday highlight ongoing economic softness. Official PMI manufacturing rose slightly to 49.4, while RatingDog PMI (formerly Caixin PMI) edged up to 50.3. While better than expected, weakness persists in construction and employment indices, underscoring the need for stronger stimulus targeting housing and consumption. The price indices were the main bright spot suggesting easing deflationary pressures as output price indices improved.

In the US, an appeals court ruled IEEPA tariffs illegal but allowed them to remain until 14 October, giving the Supreme Court time to intervene. The Trump administration has prepared a backup plan to replace IEEPA tariffs with broader sectoral tariffs, similar to Section 232 tariffs on steel and aluminium, though these would take longer to implement. While fewer tariffs would be positive for now, the prolonged uncertainty poses a downside risk.

What happened Friday

In the US, July’s PCE figures aligned with expectations, with headline inflation at 2.6% y/y and core inflation rising to 2.9% y/y, marking the third consecutive monthly increase in core inflation and leaving the door open to a potential rate cut in September. Meanwhile, August’s revised Michigan Consumer Sentiment index dropped to 58.2, indicating a modest decline in consumer confidence, as both current conditions and future expectations weakened, with a growing number of consumers viewing jobs as ‘hard to get’.

In euro area, we received inflation figures for France, Germany and Spain ahead of the euro area inflation release this Tuesday. Both France and Spain reported lower-than-expected inflation. French HICP inflation fell to 0.8% y/y, below the expected 0.9%, driven by muted services inflation, while Spain’s headline inflation remained steady at 2.7% y/y, below the anticipated rise to 2.8%, though core inflation edged up to 2.4% y/y. In contrast, German HICP inflation surprised to the upside at 2.1% y/y, driven by base effects in energy and goods as well as strong food prices. Overall, we expect euro area HICP inflation to come in at 2.0% y/y (cons: 2.1%).

In Sweden, GDP figures were revised upward as expected, slightly exceeding consensus at 0.5% q/q and 1.4% y/y. Consumption rose 0.4% y/y in Q2, signalling some recovery for households, while retail sales improved in July but remained below early-year levels. Backward revisions lowered GDP growth for both FY2025 and FY2024, yet Q2 recovery momentum was stronger than anticipated, presenting a mixed outcome for the Riksbank.

In Norway, the NAV unemployment rate remained steady at 2.1% (s.a.), aligning with Norges Bank’s June MPR estimate and should in isolation support the case for a September rate cut. Meanwhile, Norwegian retail sales rose by 0.6% m/m in July, slightly below our expectations of a 1% lift signalled by leading indicators, following a largely flat performance in Q2.

Equities: Global risk sentiment deteriorated on Friday amid a sell-off in US yields, led by the long end, with the 30-year US Treasury yield rising by 4bp. The S&P 500 closed -0.6% on Friday, erasing earlier gains from the week and ending broadly unchanged for the week. Unsurprisingly, defensives outperformed cyclicals by 1pp on Friday. The sell-off in cyclicals was led by the tech sector, after a strong run last week, declining 1.6%. In Europe, the CAC 40 continues to underperform amid lingering political turmoil.

FI and FX: On a relatively muted day in the FX market terms of price action, SEK, NZD and AUD gained vis-à-vis GBP and JPY. EUR/USD ended the week close to the 1.17 level, EUR/SEK close to 11.05 and EUR/NOK around 11.75. The 10Y US Treasury yield finished the week at 4.23% – around the lowest in about two weeks. Both the 10Y US and German swap spreads ended the week at a tighter level.

Source: ACTIONFOREX

Asia’s manufacturing activity split across the region’s various hubs in August with Indonesia and Thailand powering ahead while South Korea and Japan cooled as tariffs weighed on output.In Indonesia, output and new orders increased for the first time in five months and production in Thailand rose at the fastest pace in 13 months, according to S&P Global data published on Monday. Overall activity in South Korea, Japan and Taiwan remained below the 50-mark that is the midpoint between expansion and contraction.

Asian producers have been whipsawed by US tariffs this year, and August marked the arrival of President Donald Trump’s so-called “reciprocal” tariffs on nations around the world. Overall exports have eased in recent months after a surge earlier in the year as firms sought to get ahead of the levies.The impact of higher US import duties varied across the region: In Japan, new export orders contracted at the quickest pace since March 2024, with reduced demand from Europe, China and the US. In South Korea, the decline was the biggest since April. Even in Thailand, a surge in new orders was led by domestic demand, as new export orders fell for the first time since April.

Meanwhile, Indonesia strengthened as overall activity expanded for the first time since March, allowing firms to raise prices by the most in about a year. New export orders rose at the steepest rate since September 2023 and companies remained optimistic for the year. In recent days, though, widespread protests have gripped the nation on inequality and labour concerns.Vietnam and Malaysia purchasing managers indices are reported later in the week and will provide a fuller picture of activity in the region.

Source: Theedgemarkets

Defense Secretary Pete Hegseth announced last week that the military would cease using a Microsoft program that relied on Chinese engineers. This obviously presented a major security issue, which Hegseth noted.“If you’re thinking ‘America first’ and common sense, this doesn’t pass either of those tests,” Hegseth said of the program.“The use of Chinese nationals to service Department of Defense cloud environments? It’s over.”

He also declared that the DOD had delivered a formal letter to Microsoft, chiding the tech giant for breaching the trust of its government and for allowing such a problem to arise. The Pentagon promises to do more audits of its Microsoft-provided programs and other tech initiatives for China connections.

Microsoft is one of the worst offenders in this CCP connection.

Its co-founder, Bill Gates, always finds an opportunity to praise China. In March, Gates gushed over the communist state’s tech advances and warned that any American attempts to counter Chinese growth would stifle global innovation.The tech giant has a large presence in the country, generating fears that this would allow the CCP access to our national security operations.The “digital escorts” program that the DOD just revoked, confirmed these fears.Microsoft’s Chinese engineers handle some of the most sensitive material the Pentagon processes.

As ProPublica reported in July:

Microsoft uses the escort system to handle the government’s most sensitive information that falls below “classified.” According to the government, this “high impact level” category includes “data that involves the protection of life and financial ruin.” The “loss of confidentiality, integrity, or availability” of this information “could be expected to have a severe or catastrophic adverse effect” on operations, assets, and individuals, the government has said. In the Defense Department, the data is categorized as “Impact Level” 4 and 5 and includes materials that directly support military operations.

Former CIA senior executive Harry Coker told the outlet, “If I were an operative, I would look at that as an avenue for extremely valuable access. We need to be very concerned about that.”The ChiComs may even inspire some of Microsoft’s domestic operations. The tech giant played a critical role in setting up the censorship industrial complex that has been weaponized against conservatives in the U.S. and elsewhere. The CCP would be proud of such an endeavor.

Microsoft cultivates close ties with China because its dominance of the market makes its executives think it’s too big to punish. It’s only the operator who can serve the government’s national security needs in certain areas. Any concerns about communist subversion are ignored when it’s the only option available.These practices likely run afoul of antitrust law, making Microsoft a prime target for a Federal Trade Commission investigation. FTC Chairman Andrew Ferguson has made it a priority to crack down on Big Tech malfeasance in the market. Microsoft’s actions don’t just violate free market principles—they also put our national security at risk.

The FTC announced a probe into Microsoft’s bundling practices last December. The tech company allegedly uses this strategy to make itself seem the best option for government contracting while unfairly cutting out the competition. This lack of serious competition cements Microsoft’s cavalier attitude towards China and its reluctance to change that behavior. If no other company can challenge Microsoft’s stranglehold, there’s little motivation to correct the tech giant’s errors.

The administration wants to mandate a simple standard for companies it does business with: put America first. Microsoft and other tech giants fail this basic criterion. Previous administrations allowed them to skate by due to their monopolies. It’s time to change that for the sake of the national interest. We can’t allow China to further undermine our defense capabilities because we’re afraid of upsetting Bill Gates.

Source: Zero Hedge

As if the ever-changing trade mandates from U.S. President Donald Trump weren't hard enough for companies, here comes a new complication: the federal appeals court.On Friday, the U.S. Court of Appeals for the Federal Circuit ruled that Trump's imposition of "reciprocal" tariffs on countries, as well as those on China, Canada and Mexico ostensibly in relation to fentanyl trafficking, was an overreach of his authority.

That said, those tariffs will be allowed to persist until Oct. 14 so that the Trump administration has time to appeal to the U.S. Supreme Court.On first blush, this development might seem to benefit stocks, which have already had a rip-roaring August. For the month, the S&P 500 added nearly 2%, the Dow Jones Industrial Average advanced over 3% and the Nasdaq Composite rose 1.6%.However, tariffs flicking on and off might be more anxiety-inducing than the certainty of planning strategies around tackling those duties.

And that means potential volatility in markets. August's gains could be tested in September — the worst month for the S&P 500, historically speaking. Investors might hope to score consecutive months of gains but, at this moment, the added uncertainty around trade policies might diminish those chances.

What you need to know today

Most Trump tariffs are illegal, U.S. appeals court rules on Friday. Nevertheless, the court allowed the tariffs to run until Oct. 14 to give the Trump administration time to appeal the decision to the Supreme Court. Here are the tariffs affected by the ruling.Core inflation in the U.S. ticked up in July. The personal consumption expenditures price index, released Friday, showed a 2.9% rise in prices on the year. While in line with expectations, the reading is the highest since February.

U.S. stocks had a winning August. Even though the S&P 500, Dow Jones Industrial Average and Nasdaq Composite fell on Friday, all notched solid gains for the month. The pan-European Stoxx 600 index lost 0.64%, with most regional bourses in the red.China and India could be partners instead of rivals, Xi Jinping says. The Chinese president made that remark at a security conference on Sunday, according to Xinhua. The sentiment was echoed by his Indian counterpart Narendra Modi, Reuters reported.

August jobs number in focus. After July's dismal report made Trump fire the U.S. commissioner of labor statistics, investors will keep a close eye on August's report, out Friday, not just for the data but also the president's reaction.

Here's what it really means for Trump to get control of the Federal Reserve board

President Donald Trump's effort to sack Federal Reserve Governor Lisa Cook is about more than firing someone: It's a maneuver that, if successful, would mark a seismic shift for an institution that for ages has been considered above politics.Should Trump get a majority of members on the board of governors to vote the way he wants — and the evidence right now, to be sure, is scant that he can ever achieve such a goal — it would give him access to key levers that control the economy as well as the nation's financial infrastructure.

Source: CNBC

A Coordinated Withdrawal from Clean Energy Development

Market Surges Amid Historic Foreign Selling