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Manufacturing and Consumption Falter as Economic Pressures Mount

Structural Drag from Property and Labor Markets

Investment Momentum Weakens Despite Policy Rhetoric

Weather Shocks Compound Economic Challenges

Global Trade Diversification Yields Mixed Results

Stimulus Expected, but Scope May Be Limited

Fragile Recovery at Risk Without Decisive Policy Action

Source: Reuters

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

Key points:

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