Markets Start the Week on Edge as Politics, Policy, and AI Collide

A Shift From Confrontation to Negotiation

Tech Titans Gain Influence as Hawks Lose Ground

Trade Deals Over Tariffs?

Internal Divisions in the Administration

A Return to Pre-2015 Thinking

Source: Bloomberg

Unions Move to Court as Layoff Threat Looms

White House Defends Position, Blames Democrats

Wider Economic Impact and Political Stalemate

A Legal and Political Showdown Intensifies

Source: Bloomberg

A Historic Rally Driven by Political and Economic Turmoil

Monetary Policy and Safe-Haven Demand Reinforce the Surge

Market Reaction and Broader Metals Outlook

The Risk Premium Remains Elevated

Source: Bloomberg

U.S. technology companies are delaying their decisions to lease large data centers in India, jittery from the recent souring of trade ties between New Delhi and Washington. The orders from Big Tech companies for hyperscalers, or data centers that consume vast amounts of computing power, are "still in the pipeline, but they are holding the pen and saying let me not sign it just yet," said Alok Bajpai, managing director of India for NTT Global Data Centers.

Hyperscalers, including Amazon, Microsoft and Google, currently account for about 30% of India's data center demand, a share expected to rise to 35%, according to data from property consulting firm Anarock Capital. New deals for data centers have been on hold for more than two months now, while hyperscalers may revisit their plans in the next three to six months, said a property consultant, who spoke on condition of anonymity due to business sensitivities. Clauses for tariff pass-throughs, change in law, and phased capacity are quietly becoming standard. Partner at Argus Partners Jitendra Soni Trade relations between the two countries have soured in the last two months.

In August, the U.S. imposed 25% tariffs on goods from India, before raising the levies to 50%, citing India's purchase of Russian oil. That was followed by a new $100,000 "one-time" visa fee on fresh H-1B visa applications, effective Sept. 21, announced by U.S. President Donald Trump — a move expected to hit Indian workers hardest. "The new U.S. tariffs on Indian exports have unsettled global supply chains and made equipment and input costs harder to pin down," said Jitendra Soni, a partner in the technology and data privacy practice at law firm Argus Partners.

India's data center capacity is expected to nearly triple in the next five years from 1.2 gigawatts to more than 3.5 gigawatts by 2030, according to multiple industry estimates, despite the tensions with Washington. Lower costs and rising demand in e-commerce services, cloud infrastructure and AI workloads have fueled the demand. However, the uncertainty is showing up in data-center negotiations, "where clauses for tariff pass-throughs, change in law, and phased capacity are quietly becoming standard," said Soni. A shortage of graphics processing units, or GPUs, had already slowed expansion. The latest trade frictions have added another layer of caution. "

Hyperscalers haven't vanished, but have just hit a pause," the property consultant said. Companies reportedly interested in setting up large data centers in India include Google , which was in talks with the Andhra Pradesh state government to develop a 1-gigawatt facility, and OpenAI , which is looking for partners for a similar project. "India's underlying appeal has not dimmed and remains compelling," Soni said. "But deals are now closing more slowly, and with far more lawyering around who bears the next global shock."

Source: CNBC

Nikkei Surges on Market Optimism

Automakers and Exporters Lead Gains

Regional Market Divergence

Political and Economic Outlook

Global Context: U.S. Uncertainty Lingers

Source: AP

Six months after the Trump administration began its messy global tariff campaign, the euro area is weathering the storm, according to European Central Bank President Christine Lagarde. There’s been no economic shock. Inflation is under control. Tariff deals have brought relief. And investor confidence in the euro has driven it to a four-year high versus leading currencies. Even the golf went Europe’s way in the Ryder Cup tournament. But the common currency’s strength poses a threat to the bloc’s growth.

Crisis-era hotspots like Spain and Greece are in good shape but Germany and France account for half the euro area’s gross domestic product and their economies are springing leaks. Rising trade barriers are squeezing German exporters; Bloomberg Economics sees no improvement in the coming months, expecting Germany to deliver near-zero growth in the second half of the year. France, meanwhile, is reeling from a political crisis and budget uncertainty that’s holding back investment. The last time France boasted inflation well below 2% and growth of less than 1%, the ECB was slashing interest rates to below zero.

The euro’s strength looks more problematic in this light. The dollar’s 11.8% slide versus the common currency this year looks increasingly driven by investor positioning as the White House pushes domestic currency weakness as a path to prosperity. That has the painful side-effect of adding to tariff pressures that make euro-area exports less competitive. Even more glaring is the Chinese yuan’s 16.4% decline versus the European currency over the past three years, reflecting Beijing’s determination to keep its own export engine whirring at Europe’s expense. The trade war is being lost on both fronts.

The ECB doesn’t seem to be in a hurry to respond. Frankfurt’s rate-setters officially have no mandate to target exchange rates, for one thing. They also probably have no desire to emulate the Swiss National Bank’s $42 billion war chest of US tech shares, part of a toolkit that’s earned Bern a Trumpian tongue-lashing over “currency manipulation.” They also traditionally see the positives of a stronger euro as keeping inflation in check and adding a feather in the cap of reserve-currency status.

But the pressure may only increase; analysts expect the euro to keep appreciating, and its growth-smothering negatives will become harder to ignore. ECB Vice President Luis de Guindos has explicitly said that a euro changing hands for more than $1.20 — compared with about $1.17 currently — will “make things much more complicated.” Most vulnerable are the cash-strapped, unpopular governments struggling to deliver anything close to Mario Draghi’s vision of a more cohesive and faster-growing continent, moving ahead with more joint debt issuance to build the technological, defense and infrastructure assets of tomorrow.

What Lagarde and her colleagues should do — that even the SNB can’t — is ditch complacency and use the wiggle room they have to cut interest rates further. Swiss rates are at zero; the euro area’s benchmark is at 2%. Hawks will howl that this will let loose inflationary spirits, but that’s hard to square with the surge in Chinese goods landing on European shores, the recent disappointing economic data and, indeed, the euro’s strength. Trade deals haven’t changed the outlook that much, as Lithuania’s central bank chief Gediminas Simkus has pointed out.

These are unusual economic times. Washington is out-protecting Brussels while Beijing is out-competing Berlin. Currencies are now an extension of politics by other means. Weathering the foreign exchange storm won’t provide much comfort if European firms continue to invest billions into the US while Russian drones fly overhead. While the euro area gathers its geopolitical strength, at least let its currency be weaker.

Source: Bloomberg Europe