China`s growth slows again in August

General market commentary

Last week, global equity markets held firm despite a busy flow of economic updates. In the US, major indices stayed close to record highs, with gains not just concentrated in technology but beginning to broaden into more cyclical sectors. The overall tone was one of resilience, as investors weighed softer economic signals against expectations of continued policy support. Elsewhere, shares in Europe and Asia were more mixed, reflecting currency moves and lingering concerns over growth and government finances, while US equities continued to lead performance.

Economic data added further nuance to the market picture. Headline CPI in the US ticked up to 2.9% in August, while core CPI remained steady at 3.1%, showing inflation is still above target but contained. Producer price inflation, meanwhile, cooled more than expected, pointing to easing cost pressures at the wholesale level. Labour data were less encouraging, with jobless claims climbing to their highest in four years and earlier payroll estimates revised lower, reinforcing signs of a softer jobs backdrop. Taken together, the data bolstered expectations that the Federal Reserve may adjust policy to provide additional support, though markets remained steady overall, reflecting confidence that growth can stabilise in the months ahead.

Latest market and economic update

Asian markets were mostly steady on Monday after last week’s gains. China’s factory and retail data disappointed, but tech-led optimism kept mainland and Hong Kong shares near multi-year highs. South Korea’s KOSPI hit a record, while Japan’s markets were closed for a holiday. Australia dipped slightly, Singapore was flat, and India’s Nifty opened unchanged.

US equity futures were largely unchanged overnight, with S&P 500 futures at 6,644.75, Nasdaq 100 at 24,349.0, and Dow Jones at 45,859.0. Investors awaited the Federal Reserve’s policy decision later in the week, while AI optimism supported technology equities, bolstered by Oracle’s cloud revenue upgrade and new large-scale AI contracts.

European shares closed slightly lower on Friday as investors weighed global rate outlooks and awaited Fitch’s credit rating for France. The STOXX 50 finished flat at 5,387, while the STOXX 600 eased 0.1%, dragged down by pharmaceutical equities. Novartis fell 3% after a Goldman Sachs downgrade, with Roche, AstraZeneca, and GSK down over 1% each.

The dollar remained steady on Monday ahead of key central bank decisions, including the Federal Reserve’s anticipated rate cut. It held at 97.65 against a basket of currencies, while the euro edged down 0.09% to $1.1724, largely ignoring France’s credit downgrade. Market focus is on the Fed’s guidance and potential follow-up easing.

Oil prices rose in Asian trade this morning, supported by fears of supply disruptions after Ukrainian drone strikes on Russian energy facilities. Brent climbed to $67.26 and WTI to $62.72. Gains were also underpinned by a softer dollar and expectations of a U.S. Federal Reserve rate cut, which could bolster global fuel demand.

China’s economy showed further weakness in August, with industrial output slowing to 5.2% year-on-year and retail sales rising just 3.4%, both below forecasts. Fixed asset investment grew only 0.5%, while house prices fell 2.5%. The data underscored pressure from U.S. tariffs, softer global demand and fading impact of Beijing’s earlier stimulus measures.

BlackRock executive Rick Rieder is emerging as a leading candidate to succeed Jerome Powell as Federal Reserve chair when his term ends in May, Bloomberg reported. Treasury Secretary Scott Bessent met Rieder to discuss monetary policy, Fed structure, and regulation. The administration has interviewed four of 11 candidates, with more names expected to be added.

Fitch downgraded France’s credit rating to A+ from AA-, citing political turmoil and rising debt after Prime Minister Bayrou’s resignation over a failed austerity budget, maintaining a stable outlook. In contrast, Portugal was upgraded to A from A-, reflecting strong fiscal management, debt reduction, fixed-rate debt, and 1.9% Q2 growth supported by consumption, exports, and tourism.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

OpenAI plans to share around 8% of its revenue with commercial partners, including Microsoft, by the decade’s end, down from the current 20%, potentially keeping over $50 billion extra for itself. The companies are also negotiating server rental costs. A non-binding deal allows OpenAI to restructure into a for-profit entity while its nonprofit arm remains heavily funded.

Rheinmetall AG announced plans to acquire Naval Vessels Lürssen, Germany’s military shipbuilding arm, pending regulatory approval and expected to close in early 2026. The acquisition expands Rheinmetall into naval defence, complementing its land and air systems. NVL, with 2,100 employees and €1bn in 2024 sales, operates four shipyards and has supplied around 1,000 vessels globally.

UBS is reportedly considering relocating to the US in response to proposed stricter Swiss capital requirements following its Credit Suisse takeover. Senior executives have met US officials to explore options, including a merger or acquisition. CEO Sergio Ermotti criticised the proposals as excessive but stressed it is too early to decide, while London is also under consideration.

Supermicro has begun volume shipments of NVIDIA Blackwell Ultra systems and rack plug-and-play data centre solutions worldwide. Its pre-validated NVIDIA HGX B300 and GB300 NVL72 systems enable rapid deployment for large-scale AI training, inference, and reasoning. The move strengthens Supermicro’s portfolio and positions it as a key enabler of AI infrastructure.

JP Morgan said Apple’s new iPhone 17 series is seeing stronger early demand than the iPhone 16, with delivery lead times in the U.S., China, Germany and UK tracking ahead. The new ultra-thin Air model is drawing particular interest. While Apple shares fell on weak AI signals, rising demand could aid its sales outlook.

Giorgio Armani’s will directs heirs to gradually sell or list the fashion house, valuing it at €5–12 billion, prioritising LVMH, L’Oréal, or EssilorLuxottica. An initial 15% stake must be sold within 18 months, with 30–54.9% following in three to five years. The foundation retains 30% voting rights, ensuring control and continuity of Armani’s legacy.

Mizuho Securities raised Broadcom’s price target to $410, maintaining an Outperform rating, citing strong AI business growth and momentum in custom silicon and networking. AI revenue is forecast at $39 billion in FY26, $60 billion in FY27, and $75 billion in FY28, with overall revenue and EPS also revised higher, supported by new customers, products, and high margins.

BofA reaffirmed an upbeat stance on Alibaba, raising its ADR price target to $168 from $152, citing robust demand for AI and cloud services. The company plans to invest 380 billion yuan ($53.4 billion) in AI and cloud between 2025–2027, unveiled a new AI model, Qwen, and is addressing U.S. chip export restrictions with internal chips.

Mizuho downgraded Applied Materials to Neutral from Outperform, lowering its price target to $175, citing intensifying competition in China and technology transitions at legacy nodes. Analysts warned that exposure to PVD, plasma CVD, and 28nm+ etch could drive revenue down 15–20% in China, while Lam Research is seen as better positioned in critical etch and deposition segments.

Wedbush reiterated its Outperform rating on AppLovin, raising its price target to $725, citing strong gaming momentum, e-commerce expansion, and upcoming launches. Analysts expect 20–30% annual top-line growth with 80–85% margins, driven by user acquisition, international expansion, and Axon 2.0, while AppLovin’s proprietary data gives it a competitive edge.

Goldman Sachs downgraded Novartis to “sell” from “neutral,” citing generic competition, stretched valuations, and a muted pipeline. Entresto generics have captured 35% U.S. market share, pressuring sales and margins. Broader patent expiries risk $41 billion in peak sales, while risk-adjusted pipeline potential is $19 billion. Revenue growth is expected to slow sharply from 2026.

Bernstein initiated coverage on Puma with an “Outperform” rating and €24 price target, citing an inflection point under new CEO Arthur Hoeld. Despite near-term revenue and margin declines, the firm sees rebound potential by 2027, driven by inventory clearance, strategy resets, heritage branding, and growth in Europe, Latin America, and India, with an asymmetric risk-reward profile.

UBS initiated coverage on Gaztransport & Technigaz with a “buy” rating and €190 price target, highlighting its leading LNG containment technology. The firm expects global LNG volumes to rise 42% by 2030, boosting GTT revenues and orders. Earnings per share are projected to grow from €9.37 in 2024 to €14.60 in 2028, supported by LNG project approvals and carrier deliveries.

Upcoming data and events

This week, attention will be on monetary policy in the main economies, with the Federal Reserve, Bank of England, Bank of Japan, and Bank of Canada all expected to announce decisions. Key economic data include US retail sales and industrial production, UK and Canadian inflation, Japan’s CPI, and Eurozone trade figures, alongside China’s monthly economic update.

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