China's Economic Slowdown Deepens in August as Factory and Retail Sectors Falter

China’s economic activity slowed more than expected for a second straight month with a sharp slump in investment, adding to the likelihood that policymakers will roll out more stimulus to ensure growth stays on track to hit the official target.Production at Chinese factories and mines expanded 5.2% last month from a year earlier, according to data released by the National Bureau of Statistics on Monday, compared with July’s gain of 5.7%. The median forecast of economists in a Bloomberg survey was for an increase of 5.6%.“The economy was generally stable” in August, the NBS said in a statement. But “there are still plenty of instability and uncertainties with the external environment, and the economy still faces many risks and challenges.”

Retail sales grew 3.4% on year in August, slower than an expectation for an increase of 3.8% and down from 3.7% in the previous month.Expansion in fixed-asset investment in the first eight months of the year decelerated sharply to 0.5%, the worst reading for the perid since 2020. The surveyed urban unemployment rate deteriorated to 5.3%.The data “confirms a sharp slowdown in the second half of 2025, especially on the investment side,” said Carlos Casanova, senior Asia economist at Union Bancaire Privee in Hong Kong.

With a boom in exports cooling off, many analysts and investors expect a downshift in China’s economy during the final months of 2025 after it clocked growth of 5.3% in the first half. The extent of the deceleration in China, set to be the top contributor to global growth over the next five years, will matter to a vulnerable world economy that’s slowing under pressure from Donald Trump’s tariffs.The economy’s surprisingly upbeat performance in the first half of the year has left China’s leadership confident of reaching the official growth target of around 5% even in case of a relatively pronounced slowdown later in the year. So far, policymakers have shown little sign of preparing major new stimulus as exports prove resilient during Trump’s second trade war.

Yet new challenges are emerging, as evidenced by a series of disappointing data readings in recent weeks.A broad measure of credit slowed last month for the first time this year, while export growth fell short of forecasts and dropped to 4.4% in August. The labor market also likely weakened in recent months, based on purchasing managers’ index surveys and private polls.Another source of pressure for the economy is the government’s “anti-involution” campaign that aims to ease overcapacity and excessive competition among companies. The effort escalated in early July and may have contributed to a fall in output that month for products ranging from steel to copper.

Even though traders have pushed equities higher in anticipation that the measures will restore profitability across the economy, the government still risks hurting employment and consumption in the absence of a major stimulus package for demand.How the campaign unfolds remains highly uncertain, making it difficult to judge when China might be able to break the grip of entrenched deflation.

Source: Bloomberg Europe

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A former DJ and his obscure Nepalese non-profit used a social media app popular with video gamers to drive massive protests and become the unlikely power brokers in installing the country's new interim leadership.Sudan Gurung, the 36-year-old founder of Hami Nepal (We are Nepal), used the Discord messaging app and Instagram to mobilise massive demonstrations that forced Prime Minister K.P. Sharma Oli to resign, in the deadliest political crisis to hit the Himalayan nation in decades, a dozen people involved in the demonstrations said.

The group used VPNs to access banned platforms and issued calls to action that reached tens of thousands of young people, they added. Representatives for Oli could not be contacted for comment."I was invited to join a group on Discord where there were about 400 members. It asked us to join the protest march a few kilometres from the parliament," 18-year-old student Karan Kulung Rai, who is not part of the group, told Reuters.

Hami Nepal's early social media posts on Discord became so influential that they were referenced on national television.As protests grew violent, the group also identified messages it termed "fake news" and shared hospital phone numbers.Hami Nepal members, who asked not to be identified as they had used proxy names online for security reasons, said Gurung and the group's other leaders have since become central to high-stakes decisions, including the appointment of the new interim leadership till elections are held on March 5.

They have already convinced the country's president and army chief to appoint former Chief Justice Sushila Karki, known for her tough stance against corruption, as Nepal's first woman prime minister in an interim capacity, three members of the group said."I will make sure that the power lies with the people and bring every corrupt politician to justice," Gurung said in his first press conference since the protest on Thursday.On Sunday, Gurung and his team were in meetings to decide key cabinet positions and were proposing that some government officials appointed by the previous administration be removed, members of Hami Nepal said."Meetings are ongoing between Karki and members of the group. We will finalise the cabinet soon," one of the members said. Gurung and Karki did not immediately respond to questions sent to their mobile phones.The "process is being carefully carried out, so that it consists of skilled and capable youth," Hami Nepal said on Instagram.

FROM DJ TO REVOLUTIONARY

Monday's protest by young adults loosely categorised as a "Gen Z" movement, as most participants were in their 20s, turned deadly within hours and rapidly brought down the government.

The protests were directed at perceived government corruption and took off following a ban on multiple social media platforms - a directive that was reversed. Protesters clashed with authorities on the streets, leaving at least 72 dead and over 1,300 injured.Gurung, who is older than the Gen Z age bracket, and his team have vowed not to take up any cabinet positions but want to be part of the future decision-making."We don't want to be politicians. Sudan Gurung was only helping the 'Gen Z' group and we are only the voice of the nation and not interested in taking leadership positions," said Ronesh Pradhan, a 26-year-old volunteer for the group.

Gurung, who was a DJ before he founded Hami Nepal, organised civic relief when the worst earthquake in Nepal's history killed over 9,000 people in 2015, and during the COVID-19 pandemic.Team members running the Instagram account, whose followers have swelled to over 160,000, and Discord posts alongside Gurung include 24-year-old cafe owner Ojaswi Raj Thapa and law graduate Rehan Raj Dangal.Thapa, who quickly emerged as a vocal protest movement leader, told Reuters in an interview that the judiciary was not independent and ensuring its freedom was a key priority once the interim government was put in place."We may need some changes to the constitution but we don't want to dissolve the constitution," he said on Thursday.

Source: TradingView

Macro hedge funds have increased bets on the Australian dollar, boosting exposure to options that pay off if the currency continues climbing against major peers, traders say.The Aussie logged its two busiest days of option activity versus the dollar last week since late July, Depository Trust & Clearing Corporation data show. On both days, call option volume — contracts that profit when the currency rises — was triple that of puts, with trades of A$150 million ($100 million) or more. The surge came as the Australian dollar touched its strongest level against the greenback since November.

“We have seen sustained interest for AUD call options versus other currencies as the macro community looks to accumulate positions for a potential breakout,” said Ivan Stamenovic, head of Asia Pacific G-10 FX trading at Bank of America Corp.The Australian dollar is September’s second-best performing major currency, trailing only Norway’s krone. Macro funds are betting its outperformance will extend in the weeks ahead, fueled by resilient household spending, stronger-than-expected growth, rising commodity prices and hawkish Reserve Bank of Australia signals. Governor Michele Bullock said earlier this month that robust consumer demand may limit the scope for rate cuts.

Macro funds aren’t just wagering on the Aussie against the greenback. The currency has also climbed to multi-month highs versus other Group-of-10 peers.Against the Canadian dollar, the Aussie is at its strongest since November, buoyed by weak Canadian growth and labor data. Those reports pushed traders to price in higher odds of a Bank of Canada quarter-point rate cut on Sept. 17. On one of the busiest Aussie dollar option days last week, every trade larger than A$50 million versus the Canadian dollar was a call option, the DTCC data show.

The Aussie has also reached its highest since mid-June against the Swiss franc, after Swiss National Bank President Martin Schlegel signaled the central bank would not hesitate to push rates back below zero if needed.“We have seen interest from hedge funds to express a bullish AUD/USD view via AUD call options in the last two weeks,” said Troy Fraser, head of foreign-exchange sales for Australia and New Zealand at Citigroup Inc. in Sydney. “AUD/CAD and AUD/CHF have also been popular pairs to express this bullish Australian dollar view.”

Source: Bloomberg Europe

New York Governor Kathy Hochul has endorsed Democratic nominee Zohran Mamdani for mayor of New York City, a key affirmation for the 33-year-old frontrunner whose candidacy hasn’t yet been fully embraced by members of his own party.“Tonight I am endorsing Assemblyman Zohran Mamdani,” Hochul wrote in an opinion piece published by the New York Times on Sunday.“Zohran Mamdani and I will both be fearless in confronting the president’s extreme agenda — with urgency, conviction, and the defiance that defines New York,” she wrote.

The decision is a blow to incumbent Mayor Eric Adams and former Governor Andrew Cuomo, both of whom are running against Mamdani — a democratic socialist — in the general election on independent ballot lines. Bloomberg has reported that Adams is weighing the future of his campaign as polls show him consistently in fourth place behind Mamdani, Cuomo and Republican nominee Curtis Sliwa.Mamdani shocked the city’s establishment by rising from relative obscurity to defeat Cuomo in the Democratic primary. He campaigned on sweeping affordability measures, including freezing rents for millions of New Yorkers, offering free child care and establishing city-run grocery stores.

His bold platform has unnerved Wall Street and business leaders, however, because he plans to raise corporate and wealth taxes to help fund it. But any increases in taxes or debt would require state approval, and Hochul has said she doesn’t want to raise levies. President Donald Trump has frequently disparaged Mamdani, once calling him a “communist lunatic.”Hochul said in her piece Sunday that she and Mamdani have had their “disagreements” and that she has emphasized to him the importance of ensuring strong leadership at the helm of the New York Police Department and that officers get whatever resources they need to keep the city safe. She also discussed with him the need to combat antisemitism urgently.

“I’m grateful to the Governor for her support in unifying our party,” Mamdani said in a statement Sunday. “I look forward to fighting alongside her to continue her track record of putting money back in New Yorkers’ pockets,” he said.Mamdani’s candidacy has been met with a tepid reception from several top figures in his own party beyond Hochul. Neither of the New York’s Senate Democrats, Chuck Schumer and Kirsten Gillibrand, nor House Democratic leader Hakeem Jeffries, who represents a district in New York City, have publicly endorsed him.

“I didn’t leave my conversations with him aligned on every issue,” Hochul wrote. “But I am confident that he has the courage, urgency and optimism New York City needs to lead it through the challenges of this moment.”Republican lawmaker Elise Stefanik, who is weighing her own bid for New York governor, blasted Hochul’s decision to endorse Mamdani.“At the exact moment when New Yorkers are looking for strong leadership from their Governor with a majority opposing Zohran Mamdani, Kathy Hochul embraces this raging Communist who will destroy New York,” Stefanik said in a statement.

Source: Bloomberg Europe

Britain and the United States will sign a deal to work together on boosting nuclear power during U.S. PresidentDonald Trump's state visit this week, the British government said, helping secure investment to fund new plants.Britain's government has launched a major push to expand nuclear power in recent months, pledging to invest 14 billion pounds ($19 billion) in a new plant at Sizewell C and advancing plans for a Rolls-Royceunit to build the country's first small modular reactors (SMR).Trump arrives in Britain for a two-day visit on Tuesday, during which he and Prime Minister Keir Starmer will announce the nuclear power tie-up. The collaboration aims to speed up new projects and investments, including plans expected to be announced by U.S. nuclear reactor company X-Energy and Britain's Centricato build up to 12 advanced modular reactors in northeast England.

An 11 billion pound ($15 billion) project to develop advanced data centres powered by SMRs in central England at the former Cottam coal-fired power station set to be announced by U.S. company Holtec International, France's EDF and real estate partner Tritax, is also on the cards, the statement added."These major commitments set us well on course to a golden age of nuclear that will drive down household bills in the long run," Starmer said on Monday.Trump and Starmer discussed working more closely together on SMRs when they met at the U.S. president's golf resort in Scotland in July.

"Today's commercial deals set up a framework to unleash commercial access in both the U.S. and UK," U.S. Energy Secretary Chris Wright said in the statement.The new tie-up will cover nuclear regulation, meaning if a reactor passes safety checks in one country, the other can use the findings to support its own checks, cutting licensing time to two years from three to four years at present.Commenting on its new partnership deal with X-Energy, Centrica's Group CEO Chris O’Shea said it would build a resilient, affordable, low-carbon energy system, while X-Energy's CEO J. Clay Sell said Hartlepool was the right place for it to scale its technology in Britain given its experienced workforce and local services.

Holtec chair and CEO Kris Singh said its plan with EDF would create thousands of local jobs while drawing on the lessons from its Palisades project in Michigan, while Simone Rossi, CEO of EDF in the UK, said the plan would benefit energy security.In a related announcement, Rolls-Royce said it had entered the U.S. regulatory process for its SMR, paving the way for potential new jobs and investment in the U.S.Among the other investments expected to be announced is a deal for UK-based Urenco to supply an advanced type of low-enriched uranium to the U.S. market.

Source: TradingView

Moving into the final quarter of the year, investors face a series of questions around key macroeconomic variables that will define the growth and risk asset outlook for 2026, and hope that the balance will get things “just right.”Looking back to the 1990s, the notion of a “Goldilocks economy” was created to describe an economic environment that was “not too hot, not too cold”—mirroring the fairy tale’s “just right” porridge. This metaphor caught fire, and even today most investors are familiar with the phrase as characterizing a beneficial balance of growth and inflation that allows the Federal Reserve to be accommodative with policy rates.

Capital markets now hope that this “just right” scenario will play out, where the economy expands steadily without overheating (stoking inflation) or slipping into recession. While recent data is trending positively, it is fair to say we are all still testing the porridge and awaiting further clarity.

The Fed meeting this week will command much of the market’s focus, but it is ultimately the macroeconomic data underpinning the pace of future rate cuts that should continue to preoccupy investors over the coming quarter.Labor and inflation data released in the past three months, including last week’s U.S. jobless claims and consumer and producer price index numbers, have strengthened expectations for continued monetary easing. Yet open questions remain about the growth outlook and the impact of any changes in underlying dynamics.

Can the economy, for instance, remain resilient despite a softening job market? Can we be assured that the labor economy will maintain this subdued pace of job gains (or slight losses), or is the porridge losing its heat and putting us at risk of a material employment contraction? Is consumer strength sufficient to offset weaker employment? Will the impact of tariffs on inflation continue to be more benign than expected, or is it simply too early to declare victory?These questions will be top-of-mind for our Asset Allocation Committee ahead of its quarterly outlook discussion later this month, with significant implications for the equities outlook, the trajectory of rates, and the shape of the risk asset landscape more broadly.

An Eye on Jobs

Currently, the more pressing area to monitor is the labor market. We’ve now had two straight months of softness in nonfarm payrolls and now a surprising rise in U.S. initial jobless claims: They jumped 263,000 in the week through September 6. Indeed, these recent data releases show that not only has jobs growth slowed but, based on preliminary annual revisions by the Bureau of Labor Statistics, that an estimated 911,000 fewer jobs were created than previously thought for the 12 months ending in March 2025.

Taken at face value, the revision implies that average monthly job creation may have been about half as strong as the 149,000 jobs per month previously reported. Overall, that would reduce the total number of nonfarm jobs by 0.6%, the largest downward adjustment since 2009. Combined with unemployment ticking up, clear warning signs are flashing in the labor market.In our view, these signs are not yet triggering recessionary fears, particularly as economists think the rate of breakeven employment growth is trending lower given declines in net immigration from border policies and deportations. This said, we remain vigilant regarding any acceleration in the deterioration of the jobs market.

Keeping Inflation in Mind

After mixed signals from the July Consumer Price Index and Producer Price Index numbers, last week’s August inflation data was more consistent in indicating that tariffs so far appear to be having a measured or moderate impact on prices.August CPI was in line with expectations, rising 2.9%—up from 2.7% in July—year-over-year with core CPI, excluding volatile food and energy prices, climbing 3.1%, the same as the previous month. Month-over-month, CPI rose 0.4%, slightly above consensus forecast.

More strikingly, annual PPI increased only 2.6%, significantly decelerating from the 3.3% rate recorded in July and the 3.3% forecast. Core PPI in August increased 2.8%, down from 3.7% the previous month. On a monthly basis, PPI fell 0.1%, well short of the estimated 0.3% rise.Investors are eager to see how these more recent inflation trends translate into annual core PCE inflation, the Fed’s preferred measure, which increased 2.9% in July. While inflation levels are still well above target, they are trending more favorably than most expected as tariffs are being digested, which has given the Fed a more palatable dynamic to work with.

A Dovish Tilt

Clearly, labor market data has pointed to a more abrupt slowdown in employment than previously expected, which is sufficient to justify hitting the “play” button on restarting Fed cuts after “pause” was hit nine months ago. Investors are now fully pricing in a quarter-point rate cut this week—consistent with our view—and closer to anticipating a total of three rate cuts this year.It is logical that the market has shifted to a more dovish posture, but markets are pricing more aggressive action by the Fed, with rate cuts through 2026 to a neutral rate closer to 3%. However, we think this terminal rate pricing may be too optimistic. The Fed’s dual mandates will be tested as inflation will likely remain well above its 2% target, which will make the monetary easing path complex and more uncertain than the markets seem to be expecting.

Looking Ahead

As we move into the final quarter of the year, we believe there are good reasons to be constructive in our outlook on economic fundamentals and risk markets over the medium term, a view that has been consistent throughout the year. Playing into this is that corporate earnings remain strong, capital expenditure cycles are picking up, and even the IPO and M&A markets are stirring.Potential surprises in employment and inflation data, or some other macro or geopolitical event, could, of course, provoke short-term market volatility, and investors should be mindful of these risks as they manage allocations. As ever, and in this environment in particular, diversification across asset classes is important to mitigate any turbulence.

In anticipation of those moments, it’s important to note that we see ample liquidity on the sidelines that would help absorb any shocks and act as a buffer for risk assets, as investors remain bullish on the long-term health of the economy and trajectory for earnings.While Goldilocks has yet to make her final choice on her favorite porridge, we think that once we emerge from the current period of deceleration, the stage is set for a “just right” balance between strengthening economic growth and manageable inflation in 2026, opening the door to a more accommodative monetary policy stance.

Source: Neuberger Berman