Sterling, Yen Dragged By Fiscal And Political Worries

China's military parade commemorating the 80th anniversary of the end of World War II is underway in Beijing on Wednesday, with Chinese President Xi Jinping hosting more than two dozen foreign leaders.The heavily-choreographed event will feature a parade of missiles and tanks rumbling past Tiananmen Square, soldiers goose-stepping in formation and fighter jets roaring over the capital, as China showcases its military prowess.

President Xi Jinping delivered an opening speech at the reviewing stand overlooking Tiananmen Square, before reviewing the troops in a limousine, occasionally saying, "Greetings, comrades!"More than two dozen foreign leaders, including North Korea's Kim Jong Un and Russia's Vladimir Putin, Min Aung Hlaing, the chief of Myanmar's junta and Iranian President Masoud Pezeshkian, were at the venue site, according to a broadcast feed by state media, with Western leaders largely absent.

The parade is designed to showcase some of the country's newest weapons and commemorates the country's "victory against Japanese aggression and the world's victory against fascism."The parate route will move along Chang'an Avenue, the city's central east–west artery, passing Tiananmen Square and the entrance to the Forbidden City.

Here are some scenes from the parade:

In this pool photograph distributed by the Russian state agency Sputnik, (L-R) Russia's President Vladimir Putin walks with China's President Xi Jinping and North Korea's leader Kim Jong Un before a military parade marking the 80th anniversary of victory over Japan and the end of World War II, in Beijing's Tiananmen Square on September 3, 2025.

China's President Xi Jinping starts his inspection of the troops during a military parade marking the 80th anniversary of victory over Japan and the end of World War II, in Beijing's Tiananmen Square on September 3, 2025.

BEIJING, CHINA - SEPTEMBER 03: Soldiers rehearse prior to the military parade marking the 80th anniversary of victory over Japan and the end of World War II, in Tiananmen Square on September 03, 2025, in Beijing, China. China's Victory Day military parade serves as a powerful display of national pride and military power. This year's parade carries heightened geopolitical weight with the attendance of leaders like Vladimir Putin, Kim Jong Un and Narendra Modi, underlining China's diplomatic alliances as it presents itself as an alternative global leader.

BEIJING, CHINA - SEPTEMBER 03: Security guards observe rehearsal prior to the military parade marking the 80th anniversary of victory over Japan and the end of World War II, in Tiananmen Square on September 03, 2025, in Beijing, China. China's Victory Day military parade serves as a powerful display of national pride and military power. This year's parade carries heightened geopolitical weight with the attendance of leaders like Vladimir Putin, Kim Jong Un and Narendra Modi, underlining China's diplomatic alliances as it presents itself as an alternative global leader.

BEIJING, CHINA - SEPTEMBER 03: Soldiers rehearse prior to the military parade marking the 80th anniversary of victory over Japan and the end of World War II, in Tiananmen Square on September 03, 2025, in Beijing, China. China's Victory Day military parade serves as a powerful display of national pride and military power. This year's parade carries heightened geopolitical weight with the attendance of leaders like Vladimir Putin, Kim Jong Un and Narendra Modi, underlining China's diplomatic alliances as it presents itself as an alternative global leader.

Source: CNBC

U.S. manufacturing contracted for a sixth straight month in August as factories dealt with the fallout from the Trump administration's import tariffs, with some manufacturers describing the current business environment as "much worse than the Great Recession."

The Institute for Supply Management (ISM) survey on Tuesday also showed some manufacturers complaining that the sweeping import duties were making it difficult to manufacture goods in the United States. President Donald Trump has defended his protectionist trade policy, which has raised the nation's average tariff rate to the highest in a century, as necessary to revive a long-declining U.S. industrial base.That was reinforced by government data showing spending on the construction of factories dropped in July and was down 6.7% from a year ago. A U.S. appeals court ruled last Friday that most of Trump's tariffs were illegal, adding more uncertainty for businesses.

"I continue to see the broad economy generally and the manufacturing sector in particular as in a holding pattern until tariff-related uncertainty recedes," said Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets.

The ISM said its manufacturing PMI edged up to 48.7 last month from 48.0 in July. A PMI reading below 50 indicates contraction in manufacturing, which accounts for 10.2% of the economy. Economists polled by Reuters had forecast the PMI would rise to 49.0.

Seven industries, including textile mills, miscellaneous manufacturing and primary metals, reported growth last month. Among the 10 industries reporting contraction were makers of paper products, machinery, electrical equipment, appliances and components as well as computer and electronic products.

Tariffs continued to dominate commentary from manufacturers. Some makers of transportation equipment said conditions were worse than the 2007-09 recession, adding "there is absolutely no activity" and "this is 100 percent attributable to current tariff policy and the uncertainty it has created." Some viewed the conditions as consistent with "stagflation."

Some electrical equipment, appliances and components producers complained that "'made in the USA' has become even more difficult due to tariffs on many components." They said the "administration wants manufacturing jobs in the U.S., but we are losing higher-skilled and higher-paying roles." Others reported that because of the lack of "stability in trade and economics, capital expenditures spending and hiring are frozen."

Manufacturers of computer and electronic products said "tariffs continue to wreak havoc on planning and scheduling activities," adding that "plans to bring production back into (the) U.S. are impacted by higher material costs, making it more difficult to justify the return."

Food, beverage and tobacco products manufacturers warned that everything made of organic sugar was "about to get significantly more expensive" because of a 50% tariff on imports from Brazil and the U.S. Department of Agriculture's elimination of the specialty sugar quota.

Stocks on Wall Street were trading lower as investors worried over the appeals court ruling on the legality of tariffs. The dollar advanced against a basket of currencies. U.S. Treasury yields rose.

GRIM HIRING PICTURE

The ISM survey's forward-looking new orders sub-index increased to 51.4 after contracting for six consecutive months.

Nonetheless, ISM Manufacturing Business Survey Committee Chair Susan Spence said that for every positive comment about new orders there were "2.5 comments expressing concern about near-term demand, primarily driven by tariff costs and uncertainty." The survey's production gauge fell to 47.8 from 51.4 in the prior month.

With production declining, factory employment remained subdued, with the ISM noting that "layoffs and not filling open positions remain the main head-count management strategies."

"The grim hiring picture for manufacturing suggests companies have little confidence that a sustained improvement in demand lies around the corner," said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics.

Suppliers took a bit longer to deliver materials to factories last month. The ISM survey's supplier deliveries index increased to 51.3 from 49.3 in July. A reading above 50 indicates slower deliveries.

Lengthening delivery times meant prices paid by factories for inputs remained elevated. The survey's prices paid measure slipped to a still-high 63.7 from 64.8 in July. The high reading supports economists' contention that goods prices will accelerate in the second half of 2025.

Tariffs have been slow to pass through to higher inflation, with economists arguing that businesses are still selling merchandise accumulated before the import duties kicked in.

Businesses also have been absorbing some of the tariff-related costs. But inventories were drawn down in the second quarter and companies have warned tariffs are raising their costs, which economists expect will eventually be passed on to consumers.

It is, however, not all doom and gloom for manufacturing.

Businesses have been boosting spending on AI products, which is helping to offset some of the drag from import duties.

Spending on intellectual property products grew at its fastest pace in four years in the second quarter, while investment in equipment was strong.

Economists expect the AI spending spree to continue, with factories also likely to get a boost from accelerated depreciation allowances on investments in Trump's tax and spending bill.

"Tax incentives that start in 2026 may help to boost investment later in 2025 and into 2026, but for now most producers remain in wait-and-see mode," said Ben Ayers, senior economist at Nationwide.

Source: Kitco

Basis bids for corn and soybeans shipped by barge to U.S. Gulf Coast terminals strengthened on Tuesday, reflecting spot demand from exporters and rising freight costs in some areas.

● Traders continue to monitor falling river levels on the Ohio and Mississippi rivers. Low water could impede barge movement in the coming weeks, raising freight rates just as the harvest ramps up.

● Empty barges were offered on the lower Ohio River on Tuesday at 600% of tariff, up from 575% on Friday. Offers also firmed on the Memphis-to-Cairo segment of the Mississippi River.

● Weekly export inspections data reflected a strong pace of U.S. corn and wheat shipments. The U.S. Department of Agriculture said 1.4 million metric tons of corn were inspected for export in the week ended August 28, near the high-end of trade estimates for 850,000 to 1.5 million tons.

● For wheat, weekly export inspections totaled 802,780 tons, topping expectations for 250,000 to 700,000 tons.

● Soybean export inspections totaled 472,914 tons, in line with expectations for 200,000 to 500,000 tons. The data showed no soybean shipments bound for China.

● At the Gulf on Tuesday, CIF soybean barges loaded in September were bid at 53 cents over Chicago Board of Trade November (SX25) futures, up 3 cents from Friday.

● FOB export premiums for soybeans shipped from the Gulf in October were around 82 cents over November futures, up 2 cents from Friday.

● For corn, CIF Gulf September corn barges were bid at 68 cents over CBOT December (CZ25) corn futures, up 3 cents from Friday.

● But FOB export premiums for corn shipped from the Gulf in October were around 100 cents over December futures, down 4 cents from Friday, reflecting rising competition from South American supplies, traders said.

● Weekly U.S. crop condition ratings declined. The USDA on Tuesday rated 69% of the corn crop as "good or excellent", down from 71% a week earlier but in line with analyst estimates. The soybean crop rating slipped to 65% good-to-excellent from 69% a week earlier, below analyst expectations.

● A federal appeals court on Friday ruled most of U.S. President Donald Trump's sweeping tariffs illegal, setting up a potential showdown at the upreme Court. The ruling pressured Wall Street markets on Tuesday.

Source: TradingView

Euro-area inflation accelerated beyond the European Central Bank’s target, cementing expectations that officials will keep interest rates steady when they meet next week.

Consumer prices rose 2.1% from a year ago in August, edging up from 2% the previous month and meeting the estimates of economists in a Bloomberg poll. A core measure that strips out volatile components like energy and food held at 2.3%. Closely watched gains in services prices eased to 3.1%.

The report will confirm the ECB’s view that it can take another break from lowering borrowing costs on Sept 11, comfortable with both the pace of inflation and the economy’s ability to withstand higher US trade levies.

Officials already left the deposit rate at 2% in July, with president Christine Lagarde reiterating that the central bank is in a “good place” and investors no longer sure there’ll be any more decreases this year.

“We think the broad picture for inflation is that it will stay steady at around that 2% mark for the rest of the year,” Josie Anderson, an economist at Nomura, told Bloomberg Television’s Lizzy Burden, adding that she’s more optimistic than officials in Frankfurt on economic growth. “Our view for the ECB is no more rate cuts.”

Policymakers have emphasised that the bar for another reduction is high. Bundesbank president Joachim Nagel has described the economy as being in a “kind of equilibrium,” with inflation and rates both at 2%.

Hawkish Executive Board member Isabel Schnabel doesn’t “see a reason for a further rate cut in the current situation,” according to an interview with Reuters published Tuesday. She warned that tariffs will prove “on net inflationary.”

In a separate interview with Econostream, however, Lithuanian central-bank chief Gediminas Simkus suggested that another decrease in borrowing costs is more likely than not, with December’s meeting a possible juncture.

The latest eurozone data follow mixed reports from across the region. While figures undershot estimates in France, Italy and Spain, German inflation was slightly above forecast.

The outlook is still uncertain — even after the European Union struck an agreement with the US that will fix tariffs on most exports to the country at 15%. Finnish Governing Council member Olli Rehn warned at the weekend that there are “more downside risks” to inflation due to a stronger euro, cheaper energy and an easing of core inflation.

An account of the ECB’s July meeting offered differing views. Some warned of upside dangers because of the economy’s resilience and elevated domestic price pressures, while most saw risks to the price outlook as broadly balanced.

Source: Theedgemarkets

● Ukraine called on China to take a more active role in pressuring Russia toward peace as Putin arrived in Beijing after the SCO summit.

● Kyiv criticized the summit’s Tianjin Declaration for omitting any reference to the war in Ukraine.

● European leaders plan to meet in Paris to discuss security guarantees for Ukraine, while Trump’s proposed trilateral peace summit remains uncertain.

Ukraine urged China to pressure Vladimir Putin to move toward peace as the Russian president arrived in Beijing following his participation in the Shanghai Cooperation Organization (SCO) summit -- where he defended the war that has killed tens of thousands of people."Given the significant geopolitical role of the People's Republic of China, we would welcome a more active role [for Beijing] in bringing peace to Ukraine based on respect for the UN Charter," Ukraine's Foreign Ministry said in a statement as Putin arrived in the Chinese capital on September 2.

The ministry statement noted that the SCO’s final declaration avoided mention of the conflict, which has become a full-scale war since Russia’s February 2022 invasion of Ukraine.“We consider it eloquent that the main final document of the summit, the 20-page Tianjin Declaration, does not contain a single mention of the Russian war against Ukraine,” the statement said.“It is surprising that the largest war of aggression in Europe since World War II was not reflected in such an important, fundamental document, while it mentions a number of other wars, terrorist attacks, and events in the world.”

It said the failure to mention Russia’s war in Ukraine in the declaration “indicates the failure of Moscow's diplomatic efforts.”Ukrainian President Zelenskyy has consistently called on China -- a close ally of Russia -- to put pressure on Putin to end the war.Another high-profile diplomatic event in China will be held on September 3 -- a massive military parade commemorating the 80th anniversary of the end of World War II. Many leaders -- including Putin -- are remaining in China after the SCO to attend the parade.

Putin Blames The West

At the SCO in Tianjin outside of Beijing, Putin sent a defiant message against the West over his invasion of Ukraine after standing shoulder-to-shoulder with Chinese leader Xi Jinping.Putin said the war in Ukraine came about “not as a result of a Russian attack” but because of a Western-backed coup in Kyiv, according to comments carried by the Russian news agency TASS.That was an inaccurate reference to the Maidan protests that pushed Moscow-friendly Ukrainian President Viktor Yanukovych from power in 2014, after he scrapped plans for a trade agreement with the EU and turned toward Russia instead.

Putin added that what he called the West’s attempts to draw Ukraine into NATO posed a "direct threat to Russia’s security," a claim that the military alliance has repeatedly denied.Meanwhile, Kyiv's European allies in the so-called Coalition of the Willing -- led by French President Emmanuel Macron and British Prime Minister Keir Starmer -- are set to meet in Paris on September 4 to discuss potential security guarantees for Ukraine."Together with our partners, and in coordination with NATO, we will work to define robust security guarantees for Ukraine. These are a necessary prerequisite to move credibly towards peace," Macron wrote on X following talks with NATO chief Mark Rutte.

"We will also review Russia’s stance, as it persists in its war of aggression and continues to reject peace," Macron added.European Commission President Ursula von der Leyen on August 31 said Kyiv's European allies were working on “pretty precise plans” and a "clear road map" for a potential deployment of troops to Ukraine should a peace deal be struck between Kyiv and Moscow.Von der Leyen, in comments published in The Financial Times, added that any such venture would have the full backing of the United States, which has swayed back and forth on potential involvement over the past year.

'No Concrete Plans' For Trilateral Summit

Separately, on the sidelines of the SCO, Kremlin foreign policy adviser Yury Ushakov said there were no immediate plans for a trilateral meeting between Putin, Zelenskyy, and US President Donald Trump, contradicting recent remarks by Trump that he was arranging such a meeting."Now everyone is talking about a trilateral summit...but there has been no concrete agreement on this between Putin and Trump," Ushakov said.Trump, who has made ending the war a top priority of his administration, has grown increasingly frustrated with Putin's refusal to meet with Zelenskyy but has suggested he was moving toward a trilateral meeting with himself included.

Trump has also expressed anger with Russia's nonstop campaign of air assaults on Ukrainian cities, causing civilian deaths and damage to infrastructure.On September 2, Mykola Kalashnyk, head of the regional military administration, said an overnight Russian air strike on the city of Bila Tserkva near Kyiv killed one person and created a massive blaze at a multistory building. Attacks were also reported near the cities of Chernihiv and Sumy.Inside Russia, the Rostov regional governor reported early on September 2 that some 320 people were evacuated from an apartment block after a Ukrainian drone attack. Details were not immediately available.

Source: Zero Hedge

Key points:

A federal judge on Tuesday blocked U.S. PresidentDonald Trump's administration from using the military to fight crime in California, as the Republican president threatened to send troops to more U.S. cities including Chicago.San Francisco-based U.S. District Judge Charles Breyer found that the Trump administration willfully violated a law known as the Posse Comitatus Act, which sharply limits the use of the military for domestic enforcement, by employing troops to control crowds and bolster federal agents during immigration and drug raids. The administration deployed 4,000 National Guard members and 700 active-duty U.S. Marines to Los Angeles in June.

Tuesday's ruling dealt a setback to Trump's push to broaden the role of the military on U.S. soil, which critics say is a dangerous expansion of executive authority that could spark tensions between troops and ordinary citizens.Breyer put the ruling on hold until September 12. The Trump administration is likely to appeal.Trump said at a news conference that the Los Angeles deployment restored order, and he intended to send the military to more cities.

"Chicago is a hellhole right now. Baltimore is a hellhole right now," Trump said. "We have the right to do it because I have an obligation to protect this country."The injunction applies only to the military in California, not nationally. But the judge said that Trump's stated desire to send troops to Chicago and other cities meant that an injunction was necessary to prevent future violations of the law separating the military from law enforcement.Trump has said the troops were needed in Los Angeles to protect federal agents carrying out immigration enforcement, after large-scale immigration raids triggered protests. Lawyers for the Trump administration had argued that the U.S. Constitution permits presidents to use troops to protect federal personnel and property as an exception to the Posse Comitatus Act.

"There is no question that federal personnel should be able to perform their jobs without fearing for their safety," wrote Breyer, who was nominated to the bench by Democratic President Bill Clinton and is the brother of former Supreme Court Justice Stephen Breyer."But to use this as a hook to send military troops alongside federal agents wherever they go proves too much and would frustrate the very purpose of the Posse Comitatus Act," Breyer said.The Los Angeles deployment drew wide condemnation from Democrats, who said Trump was using the military to stifle opposition to his hardline immigration policies.

"The people of California won much-needed accountability against Trump's ILLEGAL militarization of an American city!" California Governor Gavin Newsom, a prominent Democrat who brought the lawsuit, wrote on X on Tuesday.Around 300 National Guard members remain in Los Angeles, although protests have long died down, and the administration has extended their deployment into November.California said in a court filing later on Tuesday that those remaining troops should be returned to the state's control.

The state said that the continued presence of troops could interfere with California elections in November by intimidating voters and "chilling participation."“The timing of Trump’s extension of the National Guard soldiers isn’t coincidental - he’s holding onto soldiers through Election Day," Newsom said in a statement. "The reality is this - they want to continue their intimidation tactics to scare Californians into submission."California had challenged Trump's decision to take control of the state's National Guard in June, but it lost that fight on appeal. The state said on Monday that circumstances had changed and the decision to extend the troop deployment was not legally justified.

Breyer's ruling does not bind other judges but could shape how other courts interpret the law, which has rarely been addressed by the courts."It's going to be highly influential for any challenges in other cities," said Brenner Fissell, a professor at Villanova University Charles Widger School of Law. "If a judge doesn't agree with this, he's going to or she's going to have to explain why."Trump has also deployed the National Guard to Washington, D.C., a federal district where Trump wields exceptional power.

Source: TradingView