Chip Design Software Stocks Surge as US Lifts Export Curbs to China

Economic

Summary:

Shares of Synopsys, Cadence, and Siemens rallied after the U.S. lifted restrictions on chip design software exports to China, signaling easing trade tensions and reopening access to a key semiconductor market....

US Trade Policy Shift Fuels Stock Rally

U.S.-based chip design software firms Synopsys and Cadence Design Systems posted strong premarket gains on Thursday following the announcement that the United States would lift export restrictions on electronic design automation (EDA) tools to China. The move, which is part of a broader trade easing initiative between Washington and Beijing, was received positively by investors, with Synopsys and Cadence shares climbing 5.9% and 5.4%, respectively. German conglomerate Siemens, also a key player in the EDA market, saw its shares rise 1.3% in Frankfurt.

The Commerce Department’s policy reversal also included the removal of licensing requirements for ethane exports to China, another signal that trade talks between the two nations are beginning to stabilize. These measures are part of a broader rollback of retaliatory restrictions that had been in place since China suspended rare earth mineral exports earlier this year.

China Access Critical for EDA Leaders

The three companies—Synopsys, Cadence, and Siemens—together control over 70% of the Chinese market for chip design software, according to a report from Xinhua. This dominance underscores the strategic importance of the Chinese semiconductor ecosystem to global EDA firms. EDA software is foundational to chip development, enabling the complex design of semiconductors used in smartphones, vehicles, data centers, and AI systems.

The U.S. ban, initially introduced as a response to geopolitical tensions and China's resource curbs, temporarily disrupted this lucrative revenue stream. With access now restored, these firms are poised to recapture lost business and potentially accelerate growth in the world’s second-largest economy.

Repercussions for Global Semiconductor Strategy

While the immediate market reaction has been positive, the policy reversal also reflects the geopolitical balancing act the U.S. faces in managing national security concerns without derailing its own technology sector. By lifting the EDA curbs but maintaining restrictions on advanced chip exports—particularly involving companies like Nvidia—the U.S. has signaled a willingness to differentiate between strategic threat levels within the broader semiconductor value chain.

This selective easing allows Washington to maintain pressure on cutting-edge AI chip development while still permitting commercial flow in upstream design software. For EDA companies, it offers a clearer operating framework, restoring confidence in international market access.

The U.S. decision to lift EDA software export restrictions to China marks a significant shift in trade posture and has immediate implications for global semiconductor firms. For Synopsys, Cadence, and Siemens, the resumption of business in China removes a major source of uncertainty and reinforces their competitive position in a high-demand market. The rally in their share prices reflects not just the earnings potential from renewed sales, but also growing investor confidence that a broader thaw in tech-related trade relations may be underway.

Source: Reuters

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Gerik

Economic

Marginal Expansion Follows Prior Contraction

The euro zone’s services industry, which accounts for the bulk of the region’s economic activity, staged a modest recovery in June, with the HCOB Services PMI climbing to 50.5 from May’s 49.7. This movement back into expansionary territory, though only marginal, reverses a brief contraction and suggests a tentative stabilization in the post-pandemic European economy. The improvement was also slightly better than the preliminary estimate of 50.0.

However, chief economist Cyrus de la Rubia of Hamburg Commercial Bank emphasized that this recovery comes during the longest period of subdued growth recorded in the PMI’s 27-year history. The sector has been hovering around the growth threshold for months, highlighting the fragility of demand across the bloc.

Composite Output Reflects Persistent Weakness

The broader composite PMI, which blends manufacturing and services output, edged up to 50.6, the highest level in three months, signaling only tepid overall economic expansion. While services activity lifted the index, manufacturing continues to act as a drag. Importantly, new business volumes, a key indicator of future output, contracted for the 13th straight month, although the pace of decline slowed notably to just below neutral at 49.7.

Despite the weak inflow of new work, companies in the services sector have continued to add staff. June marked the fourth consecutive month of job creation, extending a hiring streak that has now lasted nearly four-and-a-half years, suggesting firms remain cautiously optimistic about medium-term prospects.

Divergence Across Euro Zone Economies

National performance varied considerably within the bloc. Ireland maintained its lead in services growth for the fourth month running, although the pace slowed to its weakest since January. Spain, meanwhile, surpassed Italy in momentum, and Germany moved back into expansion. France continued to underperform, recording its tenth consecutive month of contraction and remaining the only major euro zone economy still in decline.

This geographical disparity underscores the uneven nature of the recovery, with some economies benefiting more from domestic resilience and external demand, while others continue to grapple with structural or policy-driven obstacles.

Inflation Pressures Complicate Policy Outlook

Input cost inflation in the services sector eased to a seven-month low, suggesting some relief in cost pressures. However, selling prices rose at the fastest rate in three months. This combination of still-elevated costs and accelerating output prices may pose a challenge for the European Central Bank, which has recently shifted to rate cuts after a prolonged tightening cycle.

Cyrus de la Rubia noted that the ECB is unlikely to be entirely comfortable with the resurgence in price pressures, especially within the labor-intensive services sector, where wage dynamics play a significant role. While a Reuters poll of economists indicated that the ECB is expected to deliver one more rate cut in September, the evolving inflation trend could limit its room for maneuver.

Confidence Rebounds But Lags Historical Norms

Encouragingly, business sentiment among service providers improved in June, reaching its highest level in 2025 so far. This represents a recovery from the 29-month low recorded in April. Yet, overall optimism remains below the long-term average, signaling that firms are still wary of downside risks, including consumer spending weakness, geopolitical tensions, and policy uncertainty.

The return to marginal growth in the euro zone’s services sector offers a cautiously positive signal, but the broader picture remains one of subdued expansion and vulnerability. While business confidence has improved and hiring continues, the ongoing weakness in new orders and persistent inflation pressures—particularly in service charges—suggest the recovery remains fragile. For the ECB, this environment presents a difficult balancing act: supporting growth through rate cuts while preventing inflation from becoming entrenched again. The coming months will test whether this modest upturn can evolve into a more durable recovery.

Source: Reuters

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Economic

Cryptocurrency

Strategic Shift in China’s Crypto Stance

In a move that could redefine China's approach to digital finance, major Chinese technology firms JD.com and Ant Group are lobbying the People’s Bank of China (PBOC) to permit the creation of offshore stablecoins tied to the yuan. According to sources close to the matter, the proposal centers on issuing these digital assets in Hong Kong, allowing them to circulate internationally while operating outside China's strict capital controls.

This effort marks a departure from Beijing’s prior posture, particularly given its 2021 blanket ban on cryptocurrencies. The lobbying suggests a growing recognition that the yuan's international use may require engagement with blockchain-based financial instruments, especially as U.S. dollar-pegged stablecoins increasingly penetrate global trade settlements and digital finance infrastructure.

Stablecoins as a Tool for Yuan Internationalisation

Stablecoins, backed by fiat currencies or liquid assets, have rapidly grown as instruments for real-time, borderless payments. The dominance of U.S. dollar-denominated stablecoins, which account for more than 99% of global stablecoin issuance according to the Bank for International Settlements, has raised concern among Chinese policy and business leaders.

By issuing a stablecoin pegged to the offshore yuan (CNH), Chinese firms aim to provide an alternative for international transactions, potentially increasing the yuan’s relevance in global trade and digital settlement networks. JD.com, in particular, has argued that the expansion of dollar stablecoins poses a strategic threat to China’s ambitions for currency internationalisation, noting the inefficiencies of current cross-border yuan payment systems.

Hong Kong as a Launchpad for Offshore Digital Yuan

The proposal is closely tied to Hong Kong’s forthcoming digital asset regulation, set to take effect on August 1. Both JD.com and Ant are preparing to issue stablecoins backed by the Hong Kong dollar, but are urging regulators to permit yuan-pegged options as well. Given Hong Kong’s currency is itself tied to the U.S. dollar, industry leaders argue it offers little strategic leverage for the yuan.

JD.com has proposed a phased rollout, beginning with yuan stablecoin issuance in Hong Kong, then expanding to China’s offshore free trade zones. According to internal sources, this proposal has received a positive initial reception from regulators, though formal approval has not yet been granted.

Market Dynamics Reflect a Dollar-Centric Reality

Despite China's ambitions, the yuan’s global share in payment settlements remains modest. According to SWIFT, the yuan accounted for only 2.89% of international payments in May, down from previous highs, while the U.S. dollar dominated with a 48.46% share. Capital controls and geopolitical risk have historically limited the yuan’s liquidity and trust as a trade settlement currency, making stablecoin development an attractive workaround.

The demand-side pressure for such alternatives is already visible. Traders at Hong Kong’s Crypto HK report a fivefold increase since 2021 in Chinese clients using USDT (Tether) for trade-related settlements. Exporters cite capital restrictions and volatility in emerging market currencies as key reasons for adopting dollar-pegged digital assets.

Global Regulatory Shifts Fuel Urgency

The push for a yuan-based stablecoin also reflects global developments. U.S. President Donald Trump’s administration has openly embraced stablecoins, advancing regulatory frameworks to legitimize their use in the American financial system. This has accelerated the international spread of U.S. digital assets and increased competitive pressure on countries seeking monetary sovereignty in digital finance.

In response, Chinese policymakers appear to be reassessing their stance. PBOC Governor Pan Gongsheng recently acknowledged the regulatory challenge posed by stablecoins. Meanwhile, PBOC advisor Huang Yiping told Chinese media that an offshore yuan stablecoin was “a possibility,” suggesting that the door is now open for selective experimentation.

The lobbying by JD.com and Ant Group underscores a broader recalibration within China’s financial strategy. While Beijing remains cautious about cryptocurrency risk, the rapid rise of dollar-denominated stablecoins and their use in trade has forced a reassessment of priorities. If approved, a yuan-pegged stablecoin issued offshore could become a powerful tool in China’s long-running effort to promote the yuan internationally, potentially altering the balance of power in global digital finance. The next phase will depend not only on regulatory alignment but also on the private sector’s ability to offer stable, liquid, and trusted instruments that can match the global reach of their U.S. counterparts.

Source: Reuters

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Economic

Bond

Volatility Surges in Longer Maturities

The global bond market has once again turned its attention to the long end of the yield curve. Ultra-long bonds — such as 30-year government debt — are experiencing renewed pressure as traders react to increasing concerns about fiscal sustainability and political instability. A sharp intraday selloff in UK gilts, triggered by speculation surrounding Chancellor Rachel Reeves’ political future, spilled over into U.S. Treasuries, pushing 30-year yields up by eight basis points. This move highlighted how sensitive long-duration securities have become to fiscal narratives and leadership signals.

The UK episode reflects broader structural fragility in long bond markets. These instruments are typically less liquid, making them prone to more exaggerated price swings when investor sentiment shifts abruptly. The response to political ambiguity, particularly in nations already grappling with fiscal stress, has reaffirmed the bond market’s traditional role as a check on government spending credibility.

Governments Rethink Long-Term Issuance

Amid rising borrowing costs, several governments are reconsidering their strategies for issuing long-dated bonds. U.S. Treasury Secretary Scott Bessent noted earlier in the week that issuing more ultra-long bonds under current yield conditions would be imprudent. Likewise, Australia’s debt office is exploring reductions in its long-duration issuance. Japan had already announced cuts in supply for its 20-, 30-, and 40-year bonds, reducing total issuance through March 2026 by ¥3.2 trillion ($22 billion).

These signals of potential supply constraint suggest governments are aware of the rising sensitivity in long-term fixed income markets. However, they also reflect growing concern about the sustainability of public debt trajectories as interest expenses rise and investor scrutiny intensifies.

Fiscal Stress Amplified by Political Uncertainty

Underlying this renewed caution is an accelerating concern about widening fiscal deficits. In the U.S., President Donald Trump’s pending tax and spending bill has reignited debate over federal balance sheet risk. In the UK, the retreat from planned welfare cuts added to market unease. Meanwhile, in Japan, the long-standing issue of persistent deficit spending continues to cloud investor sentiment despite recent auction success.

Political instability has only compounded these worries. In the UK, market jitters intensified after Prime Minister Keir Starmer hesitated to defend Chancellor Reeves in Parliament, prompting speculation about her tenure. Although he later issued a statement of support, the yield on 30-year gilts had already surged more than 20 basis points — the sharpest move since the global bond selloff in April. This episode reinforced the sensitivity of ultra-long bonds to political missteps, particularly when confidence in fiscal policy coherence is already fragile.

Diverging Auction Performance Reflects Global Risk Dispersion

Japan’s recent auction for 30-year government bonds attracted the strongest demand since February, suggesting some investor appetite remains in environments where supply reductions are clearly communicated. However, this enthusiasm did not fully shield the market from broader contagion. Even as the auction was well received, the secondary market yield for Japan’s 30-year bond rose by eight basis points to 2.96%.

In contrast, Thailand’s 10-year bond sale drew tepid interest, weakened by political turbulence following the court suspension of Prime Minister Paetongtarn Shinawatra. The disparity between auction results across markets illustrates that while some investor confidence can be restored through credible issuance strategies, broader political instability and global correlations continue to dominate pricing dynamics.

Investors Favor Shorter Maturities Amid Uncertainty

With volatility concentrated at the long end, a growing number of investors are opting to stay closer to the front of the yield curve. Tom Nash, portfolio manager at UBS Asset Management, pointed out that shorter maturities are less exposed to fiscal shocks and carry lower political event risk. In the current environment, front-end positioning provides a cleaner hedge against uncertainty while still capturing yield, especially as short-term interest rates remain elevated.

This preference reflects both defensive positioning and strategic skepticism toward longer-term commitments in a world where fiscal discipline appears increasingly unstable and political leadership shifts can quickly reshape market expectations.

As fiscal policy ambitions expand and political risks mount, ultra-long bonds have reemerged as the primary pressure valve in sovereign debt markets. The recent volatility in UK, U.S., and Japanese 30-year bonds underscores how fragile investor confidence remains at the long end of the curve. While some governments have responded with supply-side adjustments, structural illiquidity and global risk interdependence continue to make long-term debt highly vulnerable to sentiment shocks. Until clarity improves on both fiscal discipline and political stability, traders may remain wary of committing capital to the longest maturities, preferring instead the relative safety of the short end.

Source: Bloomberg

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Michelle

Economic

Forex

British services sector activity expanded at the fastest rate in nearly a year in June, and the prices they charged rose at the slowest pace in almost four years, according to a survey on Thursday that is likely to be welcomed by the Bank of England.

The S&P Global UK Services Purchasing Managers Index rose to 52.8 last month from 50.9 in May.

June's PMI was slightly stronger than a preliminary estimate of 51.3 for the month and it marked the fastest pace of growth since August 2024.

Prices charged by services firms increased at the weakest rate since February 2021.

The BoE is watching service sector prices carefully as it gauges inflation pressure in the economy. Investors largely expect the BoE to follow up on its May interest rate cut with another reduction in August, after it paused in June.

"A combination of easing price pressures and lower employment leaves the door open for the Bank of England to resume its run of interest rate cuts at the next policy meeting in August," Tim Moore, economics director at S&P Global Market Intelligence, said.

The PMI survey showed the biggest upturn in new business since November, mainly from domestic clients.

Still, business expectations for the year ahead weakened slightly as many firms were worried about political and economic uncertainty, in part due to the impact of U.S. President Donald Trump's tariffs.

But the survey also showed continued pressure on companies from labour costs, reflecting an increase in employers' social security contributions and a nearly 7% rise in the minimum wage.

Firm cut staff numbers in each of the past nine months, largely by not replacing workers who left.

New export orders fell for the third consecutive month and at the faster rate than in May, mainly due to weaker demand in Europe and the U.S.

The composite PMI, which combines the services data with Tuesday's manufacturing survey, edged up to 52.0 from May's 50.3.

The manufacturing PMI showed factories turned more optimistic last month, with some signs of the sector turning a corner in its long slump.

Source: Reuters

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Economic

Commodity

Short-Term Rally Undermined by Renewed Uncertainty

After experiencing its sharpest single-day gain in nearly two weeks, oil prices pulled back as market focus shifted from geopolitical volatility to trade diplomacy and upcoming OPEC+ decisions. Brent crude traded just below $69 per barrel following a 3% surge, while West Texas Intermediate hovered above $67. The rally, driven by optimism over U.S. trade talks, proved fragile in the face of renewed supply-side attention.

President Donald Trump’s announcement of a trade agreement with Vietnam, following earlier deals with the United Kingdom and China, offered temporary relief to commodity markets. However, analysts remain skeptical about the durability of these gains, given that broader tariffs still cast a shadow over global energy demand projections. Market sentiment has become increasingly reactive to shifting diplomatic headlines, signaling sensitivity to perceived progress but lacking strong fundamental conviction.

OPEC+ Output Strategy Becomes Key Risk Variable

Traders are now closely watching Sunday’s OPEC+ meeting, where a new decision on August output levels is expected. Consensus points toward another significant supply quota increase, which could limit the upside for oil prices. ING's head of commodities strategy, Warren Patterson, noted that despite recent trade optimism, investors are unlikely to build large positions ahead of the U.S. holiday weekend, given the potential for an output surprise from the cartel.

The balance between demand recovery and supply growth remains delicate. OPEC+ has been gradually easing its production constraints as prices stabilize, but any aggressive quota expansion could weigh on market sentiment if not matched by a sustained increase in global consumption.

US Inventory Dynamics Offer Mixed Signals

The latest data from the U.S. Energy Information Administration revealed a 3.8 million barrel increase in national crude inventories, marking the first weekly build since May. This headline figure may suggest weakening demand or delayed refinery intake. However, regional dynamics tell a more nuanced story. Storage at Cushing, Oklahoma — a critical pricing hub — declined for a fourth consecutive week, reaching its lowest seasonal level since 2014. This suggests robust demand in certain downstream segments, possibly tied to domestic refining or exports.

The divergence between total inventories and Cushing levels reflects ongoing supply chain adjustments and highlights the need to assess regional flows rather than rely solely on national aggregates.

Market Structure Indicates Underlying Strength

Despite the price dip, structural indicators in the futures market point to a still-tight supply outlook. Brent’s prompt spread — the price difference between front-month and second-month contracts — stood at $1.19 per barrel in backwardation, a market condition that signals near-term supply tightness. Although down from the highs seen during last month’s conflict between Israel and Iran, the current spread remains elevated compared to one month ago, when it sat at 69 cents.

This strengthening of the prompt spread implies that immediate physical demand remains resilient, supported by seasonal factors such as summer driving activity and elevated cooling demand during a widespread heat wave across the U.S.

While the latest retreat in oil prices reflects a cooling of speculative enthusiasm, the underlying market remains complex. Trade agreements may temper tariff-related demand fears, but any optimism is counterbalanced by expectations of additional OPEC+ supply and persistent stockpile fluctuations. As geopolitical tensions momentarily recede, the path of oil prices will likely hinge on Sunday’s production decision and the evolving dynamics of U.S. energy consumption. Traders remain cautious but attentive, with structural market signals suggesting that downside risks are limited—at least for now.

Source: Reuters

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Gerik

Economic

Washington Reverses Course on Semiconductor Tool Restrictions

In a marked policy pivot, the Trump administration has rescinded recent export license requirements on electronic design automation (EDA) software to China. This development, part of a broader trade agreement between Washington and Beijing, signals a recalibration of the United States’ approach to technology trade controls amid rising geopolitical tension. The decision affects leading EDA providers, including Synopsys, Cadence Design Systems, and Germany’s Siemens, who have begun reinstating access to their software for Chinese customers.

The move represents a key concession by the U.S., traditionally firm on export controls as a national security measure. The curbs had only recently been imposed in May as retaliation for China’s restrictions on the export of rare earth minerals essential for U.S. technology and defense industries. Their reversal, only weeks later, suggests a more transactional use of export control levers as bargaining tools within a larger economic negotiation framework.

Trade Deal Includes Broader Technology Concessions

The rollback of EDA restrictions is one of several commitments embedded in the trade accord negotiated in London, which reinstates terms previously agreed upon in Geneva. In addition to EDA software, the agreement permits the export of ethane and jet engines to China, contingent upon Beijing's promise to accelerate the approval of rare earth exports. The U.S. Commerce Department communicated the licensing policy change directly to major semiconductor design software companies, though it has not publicly commented on the decision.

This arrangement indicates a mutual willingness to temper hardline positions for reciprocal trade benefits. In particular, the U.S. decision to offer flexibility on export controls—a tool long viewed as off-limits in international bargaining—marks a significant evolution in trade diplomacy with China.

Balancing Strategic Priorities with Commercial Interests

The sudden imposition and reversal of EDA export controls highlight ongoing friction within U.S. policymaking circles. While national security officials have emphasized restricting China's access to advanced chip design tools—seen as instrumental to military and AI development—other factions within the administration favor protecting commercial ties and global supply chain stability.

According to Bloomberg sources, some U.S. officials viewed the EDA restrictions as expendable in comparison to more critical limits, such as those placed on Nvidia’s AI chip exports. These officials considered the EDA rollback a strategic compromise that preserved more sensitive restrictions while advancing trade progress.

Still, others argue that EDA software plays a foundational role in enabling China’s semiconductor development. Ryan Fedasiuk, a former State Department adviser, noted that EDA access had been one of the last remaining external tools available to firms like Huawei, whose next-generation chip ambitions could have been stalled by sustained restrictions.

Geopolitical Repercussions and Market Dynamics

While U.S. firms may benefit in the short term from restored access to the Chinese market, the episode has likely accelerated efforts within China to reduce dependence on foreign EDA tools. Heightened uncertainty around licensing regimes and geopolitical risk is expected to motivate both Chinese firms and policymakers to develop domestic alternatives more aggressively.

This raises long-term strategic concerns for U.S. companies, as short-term commercial gains could eventually lead to market share erosion in one of the largest global semiconductor markets. Even as licensing is restored, trust between vendors and clients may have eroded, reshaping the dynamics of future EDA software procurement and deployment.

The lifting of EDA export curbs illustrates the complex interplay between economic diplomacy, national security, and industrial competitiveness. While the trade agreement signals short-term progress in US-China relations, it also underscores the volatility of technology-related trade policy and the evolving balance between economic access and strategic restraint. For EDA firms, this presents a temporary reprieve but also a signal to diversify and prepare for further realignment of global supply chains in an era where technology, commerce, and geopolitics remain deeply intertwined.