Tag Archive for: Inflation

PPI Plummets: New Data Fuels Expectations for Fed Rate Cut in September

Surprise Drop in Producer Price Index Bolsters Expectations for September Federal Reserve Rate Cut

By James Hyerczyk | Updated: September 10, 2025, 13:06 GMT

In a surprising turn, U.S. wholesale data for August shows the Producer Price Index (PPI) dropping. This drop makes many think that the Federal Reserve may cut rates in its next meeting.

Key Highlights:
• U.S. wholesale prices fell by 0.1% in August, while experts had predicted a 0.3% rise.
• Core PPI, which leaves out food and energy costs, also fell by 0.1% against a forecast of 0.3%.
• Equity and bond markets reacted well, as S&P 500 futures climbed and Treasury yields dropped.
• The 10-year Treasury yield slid to 4.068%, and the 2-year yield dropped 1 basis point to 3.529%.
• CME FedWatch now shows traders fully expecting a Fed rate cut in September.

Weaker Wholesale Inflation Supports a Soft Monetary Outlook

U.S. wholesale prices fell by 0.1% last month. The Bureau of Labor Statistics found that this drop did not match economists’ views of a steady rise. The core PPI’s drop shows that price pressures eased when food and energy are not counted. This fact made investors gain hope and push up equity futures, while bond prices did well as yields dropped.

A 0.2% decline in service prices, including a 1.7% drop in trade services, added to the change. Prices in machinery and vehicle wholesaling fell by 3.9%, which suggests prices in these sectors are easing. In contrast, prices for goods edged up a small 0.1%. Energy costs fell by 0.4%, while food prices ticked up 0.1%. Core goods prices, which leave out food and energy, rose by 0.3%. The numbers point to softer price movements in the goods market.

Tariff Effects and Labor Market Dynamics Under Scrutiny

Inflation stays above the Fed’s 2% goal. Fed leaders note softer rises in rents and wages as a sign that they can be patient. Tariffs set in the past still affect some goods; for example, tobacco prices grew by 2.3%. Recent labor data showed close to one million fewer new jobs in the year ending March 2025. Some worry about this drop even as Fed officials call the job figures “solid.” Such points add extra steps to the Fed’s choice on interest rates.

Implications for Upcoming Fed Policy and Market Outlook

This unexpected drop in the PPI makes many investors and analysts believe that the Fed will lower interest rates in September. Market watchers now wait for Thursday’s Consumer Price Index (CPI) report, which may back this view. If consumer inflation shows similar softness, it may push market views toward not just one, but perhaps more rate cuts in the near future.

Soft inflation and mixed signals from the labor market have made equities rise and Treasury yields fall. If current patterns hold, markets may get ready for a looser monetary policy that supports growth.

About the Author

James Hyerczyk is a U.S.-based technical analyst and educator. He brings over 40 years of experience in market analysis and trading. He studies chart patterns and price moves, has written two books, and has worked in both the futures and stock markets.

For more timely updates on market forecasts, economic news, and financial trends, visit FXEmpire.com.

Disclaimer: This article is for educational and informational purposes only and does not mean to serve as investment advice. Readers should check details and speak with a financial advisor before making any investment decisions.

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China Faces Rising Deflation Fears Amid Weak Trade Data as Markets React Positively

China Faces Growing Deflation Risks as Trade Data Slows; Hang Seng Index Shows Gains

By Bob Mason
Updated: September 10, 2025, 02:28 GMT

China’s economy shows signs of deflation. Trade numbers weaken. Consumer demand stays low. The signs point to growth that may slow down. The Hang Seng Index climbs in Hong Kong. This rise brings hope that a new government plan may help.

Key Economic Indicators Signal Deflation Risks

China’s Consumer Price Index dropped 0.4% compared to last year in August. It was expected to drop only 0.2%. Prices did not move from month to month. This fact suggests low buying levels. Unemployment rises. Households spend less. Problems in the real estate field and a slow pickup in credit add to the low spending.

The Producer Price Index fell 2.9% compared to last year in August. In July, the drop was 3.6%. The numbers match expert views. The result shows that factory and wholesale price pressures may ease a bit.

Divergent Consumer and Producer Price Trends

Consumer prices fall to low levels as demand suffers. Factory prices hold their fall to a slower pace. Two trends show different sides of the economy. The manufacturing scene gains some hope as the RatingDog Manufacturing PMI grows. It went from 49.5 in July to 50.5 in August. New order gains hit their fastest rate since March. These changes help stop eight straight months of falling average prices.

Trade Data Paints a Bleaker Picture

Exports grew 4.4% compared to last year in August. This rate slows down from July’s 7.2% jump. The United States saw shipments fall by 33%. Trade challenges push exporters toward tougher price cuts. This change may cause prices to drop further. Tariffs and extra taxes mix into this risk.

Market Response and Policy Outlook

Investors watch the news with hope that new plans come soon. The Hang Seng Index climbs 0.60% to 26,094 early in the day. The Mainland China CSI 300 ticks up by 0.05%. The Shanghai Composite Index falls by 0.02%. Investors set their eyes on data coming on September 15. Retail sales, factory data, and job numbers matter now. The government faces more pressure to use well-targeted fixes. Low spending and unemployment call for clear plans.

Outlook

China shows signs of slow growth. Some parts of the economy recover. Other parts slip into deflation. A government plan may help steady things across the board before the Politburo meets later this month. With a weak world market and low local spending, Beijing’s next steps will be vital in stopping deeper deflation.

About the Author:
Bob Mason works in financial markets over 28 years. He studies currency, commodities, and stocks with a focus on economies in Europe and Asia.

This report uses data available on September 10, 2025. It serves for information and does not give investment advice.

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China’s Economic Ambitions Amidst Deepening US Trade Strain: A Strategic Shift for Global Trade?

China Prepares for Global Economic Shift Amid Deepening US Trade Tensions

Date: September 9, 2025

By Bob Mason

Economic tension grows between the United States and China. Beijing shifts its trade approach. New numbers show US tariffs hitting Chinese exports. This hit puts pressure on growth and trade models.

US Tariffs Slash Chinese Exports

Exports slow in August. Shipment growth sits at 4.4% year-on-year, down from 7.2% in July. Exports to the United States see a 33% drop. US tariffs hit hard. Imports from the US fall 16%. Tariffs under a 90-day trade break add strain. Export levels hit their lowest point since January 2025. Early moves to ship more goods now lose effect. Analysts point to rising trade risks.

Trade Patterns Show Mixed Signals

Trade outside the US paints a complex picture. Exports to ASEAN rise by 9.7% from January to August 2025. EU shipments climb 4.3%. South Korea and Japan also see growth. These gains partly balance the 13.5% drop to the US. Other tariff rules add problems. Vietnam now holds a 40% tariff on goods heading to the US. Indonesian goods face a 19% tax. Rerouting goods becomes harder.

Natixis Asia Pacific’s chief economist Alicia Garcia Herrero sees a tougher period ahead. She says rerouting problems will hit exports in the later months. Beijing plans changes as a response.

Trade Law Reforms and Strategic Shifts

China now studies a trade law change. It would be the first update since 2004. Sources say new rules may bring clearer limits on cross-border services. The rules may also back newer digital and green trade systems. The Vice Commerce Minister points to new land and sea trade links with ASEAN. The goal is to keep supply chains strong amid trade pressures.

Economic Risks and Labor Market Concerns

The drop in export demand may spread inside China. Youth job numbers jump from 14.5% in June to 17.8% in July. Overall, unemployment grows to 5.2%. A weaker job market may slow spending. Economist Mohamed A. El-Erian of Queen’s College in Cambridge says these numbers call for stronger government action in reworking how the economy grows.

Market Reactions and Global Relations

Chinese stock markets cool off from 2025 highs. The CSI 300 and Shanghai Composite fall about 0.7% in September. Yet, they compare well with the Nasdaq Composite year-to-date. A 90-day US-China trade break holds for now. Still, trade gains do not match real progress. Beijing turns to partners like India and Russia. At the recent Shanghai Cooperation Organization summit, leaders such as Russia’s Vladimir Putin and India’s Narendra Modi joined the talks. These moves show that China seeks more global ties amid rising US tensions.

Looking Ahead: Inflation, Retail Sales, and Policy Measures

Soon, investors watch new economic reports. Inflation numbers come on September 9. Retail sales and industrial output reports arrive on September 15. Weak retail and factory numbers, along with deflation risks, may test the 5% GDP target for 2025. Beijing plans focused stimulus to support jobs and spend. Success in these moves and in trade talks will shape China’s path for the end of the year.

China stands at a turning point as it deals with stronger US trade pressure and its own plans for change. The coming months may shape China’s redirect on trade and growth while managing global ties and market risks.

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China’s Export Decline: A Six-Month Low Sparks Market Reactions and Economic Concerns

China’s Exports Drop to Six-Month Low, Falling Short of Forecasts; Impact Seen in Hang Seng Index and Australian Dollar

September 8, 2025 — By Bob Mason

China’s exports slowed in August. Growth touched its weakest pace since January 2025. The numbers did not meet most experts’ numbers. This slower pace sent shocks into nearby markets. The Hang Seng Index in Hong Kong fell, and the Australian dollar felt the strain from ties with China.

Export Slowdown Details

New trade numbers show China’s exports grew 4.4% year-on-year in August. This rate is much slower than July’s 7.2% rise. The 4.4% figure missed most experts’ 5% prediction. This gap stoked fears about lower demand from abroad. Imports also slowed. They rose 1.3%, far below the expected 3% rise and down from a 4.1% increase last month.

The drop comes partly as sellers rushed to ship goods before U.S. tariffs began. The tariffs have changed trade paths. Southeast Asian partners now fill in as supply hubs. In one case, a trade pact in Vietnam brings a 40% tariff on goods in transit. In another, Indonesian goods face a 19% fee when shipped to the U.S.

Broader Economic Indicators and Expert Views

China’s Manufacturing Purchasing Managers Index made a small gain from 49.5 in July to 50.5 in August. The new number shows that production activity barely stayed in neutral territory. New export orders have fallen for five months in a row. These orders show that demand for goods remains low. Meanwhile, new business in services has grown at the fastest rate since May 2024. This growth shows some strength in the service sector.

Alicia Garcia Herrero, Chief Economist for Asia Pacific at Natixis, warned that export growth may shrink further. She said export growth could slow to 2-3% in Q3 2025 and drop to 1% in Q4. She noted that simple goods like furniture, clothing, footwear, and toys can be made in many places. Garcia Herrero mentioned that even bicycles meant for export to America are sold cheaply on Chinese websites, a sign of too many goods available.

Market Reaction

After the trade numbers came out, markets reacted fast. The Hang Seng Index in Hong Kong rose briefly to 25,545 points before falling slightly to 25,435. By the morning of September 8, the index was a bit higher at 25,515 points. Hopes for a U.S.-China trade deal and extra policy help gave some support. In contrast, stocks in Mainland China showed weakness. The CSI 300 dropped by 0.26% and the Shanghai Composite fell by 0.09%.

The Australian dollar (AUD/USD) also reacted. The pair fell from $0.65674 to a low of $0.65546 soon after the numbers came out. The AUD/USD then recovered a bit. By the morning of September 8, it closed near $0.65624. This reaction reflects Australia’s strong trade links with China. About one-third of Australia’s exports and more than half of its trade-to-GDP depend on China. These ties make the currency sensitive when new data appears.

Looking Ahead: Beijing’s Policy Moves and Inflation Data

Market watchers will keep a close eye on Beijing now that the Standing Committee of the National People’s Congress begins its sessions on September 8. Many hope that new steps will be taken to support growth in difficult times.

Key inflation data comes on September 10. The consumer price index and producer price index will show how weak export demand and tougher global competition affect prices. If prices fall, companies may face tighter margins and a change in market mood.

About the Author:
Bob Mason has more than 28 years of experience in the finance world. He has worked with global rating agencies and multinational banks. His work covers currencies, commodities, alternative assets, and global stocks with a focus on European and Asian markets.

For a detailed economic calendar, market forecasts, and trading strategies, visit FXEmpire’s resources.

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U.S. Jobs Report Disappoints: Labor Market Cooling Signals Fed’s Cautious Path Ahead

U.S. Jobs Report Misses Forecast: Weak Nonfarm Payrolls Signal Labor Market Cooling

By James Hyerczyk | Updated: September 5, 2025, 13:18 GMT

The latest U.S. employment data shows signs of a cooling labor market. In August, nonfarm payrolls grew by 22,000. This number falls far short of the 75,000 jobs that market experts predicted. The report shows slower job gains and casts doubt on the strength of the U.S. economy and on the Federal Reserve’s money policy path.

Labor Market Momentum Slows Sharply

On Friday, the August data came out. The numbers show job creation was much weaker than expected. The unemployment rate edged up to 4.3% from 4.2%. This small rise shows weaker worker activity.

Even with a small payroll gain, average hourly pay grew 0.3% to $36.53. Yearly, wages increased by 3.7%. The labor force participation rate held at 62.3%. This rate stays lower than last year and shows little change in worker engagement.

Sector Performance Reflects Uneven Job Growth

Most new jobs came in health care and social assistance. Health care added 31,000 jobs while social assistance added 16,000 jobs. In health care, this total is lower than last year’s monthly average of 42,000 jobs. Most gains in social assistance came from family services positions.

At the same time, several sectors lost jobs. These losses balanced the small gains in some areas:

  • Federal government jobs fell by 15,000. This drop has been steady since January.
  • Jobs in mining, quarrying, and oil and gas extraction decreased by 6,000.
  • Manufacturing lost 12,000 jobs. Within this field, transportation equipment manufacturing lost 15,000 jobs because of strikes.
  • Wholesale trade dropped by 12,000 jobs over three months, with a total decline of 32,000 jobs.
  • Construction lost 7,000 jobs.
  • Professional and business services reduced by 17,000 jobs.
  • Financial activities cut 3,000 jobs.

On a brighter note, retail trade added 10,500 jobs. Leisure and hospitality gained 28,000 jobs, and transportation and warehousing added 3,600 jobs.

Workforce Indicators Suggest Tepid Labor Market Confidence

Long-term unemployment rose to 1.93 million people. This group now makes up more than one-quarter of all unemployed. New job seekers dropped by 199,000 after gains in the previous month. This fall may point to less confidence among those looking for work.

The employment-population ratio stayed at 59.6%. This flat figure shows that the share of Americans with jobs remains unchanged.

Market and Policy Implications

The weak jobs data and the rise in unemployment send a clear signal. The U.S. labor market is losing steam. This trend may affect the whole economy. It hints at lower consumer spending, which might slow economic growth.

For the Federal Reserve, the weak data may support a cautious approach in policy decisions. Slower job growth cools the rise in wages and prices. The central bank might pause any further hikes in interest rates to keep the recovery on track without deepening a slowdown.

Financial markets reacted by buying assets sensitive to rate changes such as U.S. Treasuries and technology stocks. At the same time, the U.S. dollar showed a weak trend as traders expect a gentler response from the Fed soon.

Summary

  • Nonfarm payrolls grew by 22,000 in August, a number much smaller than the forecast of 75,000.
  • The unemployment rate increased from 4.2% to 4.3%.
  • Average hourly pay increased by 0.3% to $36.53 while yearly wage growth was 3.7%.
  • Labor force participation held at 62.3%.
  • Job gains were seen in health care and social assistance while losses hit the federal government, manufacturing, and mining sectors.
  • Long-term unemployment and a drop in new job seekers point to less trust among those hunting for work.
  • Market views favor a gentle Fed approach, a stance that pushed rate-sensitive investments up and put pressure on the U.S. dollar.

This report shows that the U.S. labor market is weak. It highlights the hard path ahead for policy makers and investors in these changing times.

About the Author:
James Hyerczyk is a U.S.-based technical analyst and educator with more than 40 years of market analysis and trading experience. He studies chart patterns and price moves and has written two books on technical analysis.

The information here is for learning and informational purposes only and does not count as financial advice. Please do your own research and consult a financial advisor before making any decisions.

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France’s Confidence Vote: A Tipping Point for Budgetary Stability?

France: Upcoming Confidence Vote Adds to Budgetary Uncertainty Amid Political Fragmentation

September 5, 2025 – By Thomas Gillet, FXEmpire

France now faces political and economic doubts as a confidence vote nears on September 8, 2025. Prime Minister François Bayrou called this vote over a multi-year budget plan set forth in July. Disagreements in parliament and strong opposition add to worries about the country’s fiscal path.

Political Landscape Clouds Budget Prospects

The vote comes as France readies a debate on its 2026 budget. The plan seeks to save €44 billion (roughly 1.5% of GDP). Parties on the left, such as the Socialist Party, and groups on the far right, like Rassemblement National, take a stand against these savings. Together, these groups hold 298 seats, which is more than the 289 seats needed for a majority. This fact makes it hard for the government to gain support.

If the vote does not pass, the government could collapse for the second time in less than a year. President Emmanuel Macron would then face the task of naming a new prime minister—possibly the fifth in four years—or calling for early legislative elections. An election might lead to a divided parliament where extreme far-left or far-right forces control the votes. Such a split would keep lawmakers at odds.

Economic Implications and Fiscal Challenges

Political deadlock also slows plans to lower France’s budget deficit, which stood at 5.8% of GDP in 2024. The government hoped to reduce this figure to 5.4% in 2025 and 4.6% in 2026. Still, changes made to win parliamentary backing might keep the savings measures small. Scope Ratings now predicts the deficit may only fall to 5.6% in 2025 and then to 5.3% in 2026. Government borrowing costs are on the rise. Net interest payments are expected to grow from 3.6% of government revenue in 2024 to about 4% in 2025. This level matches Belgium’s at 3.8% but stays below Spain at 5.2% and the United Kingdom at 6.6%. Ten-year government bond yields have reached 3.5%, a figure seen in both Spain and Italy. This climb shows that investors worry about France’s fiscal health.

Scope Ratings expects France’s debt-to-GDP ratio to keep growing, reaching around 122% by 2030. This outcome exceeds the government’s target of 117% by 2029. Political splits and modest budget cuts drive this steady rise in debt.

Outlook and Upcoming Risks

A positive result in the confidence vote could mean short-term progress on budgets. Yet, politics remain divided. Local elections in March 2026 and presidential elections in April and May 2027 add to the tension. These events may slow agreement on needed economic changes.

France’s outlook in the midterm stays constrained by a divided parliament. Political doubt may block steps to cut the deficit. The upcoming vote stands as a key moment that will shape French fiscal policy and political calm in the near term.

About the Author:
Thomas Gillet is a Director in Sovereign and Public Sector Ratings at Scope Ratings. His work focuses on sovereign credit analysis and fiscal policy. Senior analyst Brian Marly helped produce this report.

For a complete view of today’s economic events, visit FXEmpire’s economic calendar.

This article is for informational purposes only and should not be taken as financial advice. Readers should do their own research and consult professionals before making any investment decisions.

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UK Retail Sales Surge Challenges BoE Rate Cuts as GBP/USD Climbs to Morning High

UK Retail Sales Data Challenges Bank of England’s Rate Cut Expectations; GBP/USD Hits Morning High

By Bob Mason, Updated September 5, 2025, 06:17 GMT+00:00

UK retail sales grew last month, and this growth troubles plans for easing money policy. Consumer demand stays high, and that value makes traders doubt when rate cuts will come. The British pound moves up against the US dollar as markets adjust.

Robust Retail Sales Signal Resilient Consumer Spending

UK retail sales climbed 0.6% from June to July. Sales rose from 0.3% in June, and this beat forecasts of a 0.2% jump. Annual sales touched 1.1%, up from 0.9% the month before. Data show store-free sellers and clothing shops performing well. New items, mild weather, and busy events like UEFA Women’s EURO 2025 all help sales.
Consumer spending stays strong even when prices rise and the job market slows. Retail data like these may push up prices, which makes shops slow to cut rates.

Inflation and GDP Paint a Mixed Economic Picture

The sales report comes after recent numbers that put the Bank in a hard spot. UK inflation went from 3.6% in June to 3.8% in July. Core inflation moved slightly from 3.7% to 3.8%. These rates stand high against the Bank’s 2% goal. UK GDP grew 0.4% in June after a 0.1% fall in May.
Job numbers fall too. The Monthly Decision Maker Panel showed a 0.5% drop in jobs over the three months ending in August. Firms cut staff as they face higher costs in national insurance and minimum wages.

BoE’s Rate Cut Strategy in Question

The Bank sees a hard balance. Weak jobs might allow cuts, yet steady spending makes price rise more likely. Governor Andrew Bailey said he is less sure now about when or how fast cuts will come.
Markets now put a 25-point drop on hold until April 2026. Strong retail sales do not change this view much.

GBP/USD Reacts Positively to Retail Sales Strength

Before the sales news, the GBP/USD briefly reached $1.34187. When the sales came in, the pair moved up. It hit $1.34689 at its peak and closed near $1.34661, up about 0.25%. This move shows traders now expect slower steps toward easing in the near term.

What’s Next for UK Economic Data and BoE Policy?

Traders now watch for more UK reports. GDP numbers are set for September 12, employment figures come on September 16, and inflation data follows on September 17. These reports will shape the Bank’s next moves.
Some experts hesitate but think a rate cut could come sooner. ING points to a drop as early as November 2025, though high inflation might push that date back.

Conclusion

UK retail sales in July add weight to the Bank of England’s tough task. A weaker job market sits beside strong consumer spending and high inflation. That mix may hold back rate cuts. The British pound now stands stronger as investors wait for more data to clear the picture.

Stay tuned for updates on global money trends and central bank moves.

About the Author

Bob Mason brings over 28 years of financial industry work. He covers currencies, commodities, alternative assets, and stocks with a focus on European and Asian markets. His work has reached global rating agencies and large banks.

This article is meant to give information and should not be seen as investment advice.

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Escalating Trade Tensions and Market Volatility: China’s Strategy as 90-Day Truce Nears Its End

China: Trade Tensions Rise as Truce Nears Expiry, Markets Face Fresh Risks

By Bob Mason — September 4, 2025, 04:21 GMT

The 90-day trade war pause between the United States and China ends in October. Tensions grow and new risks shake global markets. China shows signs of worry as unemployment climbs, consumer demand fades, and investors act with care on Mainland and Hong Kong exchanges.

Strengthening BRICS Ties and Global Trade Changes

At the recent SCO Summit, China built stronger ties with BRICS nations. Leaders from Russia, India, and North Korea met here. This move shifts China’s focus away from depending on the US in trade. President Xi Jinping spoke of using the shared strength of SCO members to boost trade and investment. His words stressed the power of their large markets and matched economic roles.

The US did not like the outcome. President Trump made a sarcastic comment. He said, "give my warmest regards to Vladimir Putin and Kim Jong Un, as you conspire against the United States of America." His tone pointed to a tougher US stance after months of calm.

Changing Trade Paths and Export Shifts

After the US extended the truce in August, China’s trade hopes grew for a full agreement. Meetings between Chinese negotiator Li Chenggang and US officials did not bring clear progress. Trade tensions came back as the truce nears its end in October.

China now tries to widen its export markets. It targets Southeast Asia and nearby regions to make up for fewer shipments to the US. Leland Millar, CEO of China Beige Book, said in a Bloomberg interview that China pushes its exports into new markets. His words show that China sells goods at lower prices in these countries. The move sends extra capacity into markets that seem weak in money and politics.

Mounting Economic Pressures

Exports rose by 7.2% in July, compared to 5.8% in June. Yet, data from the private sector shows caution. The August PMI data pointed to higher input costs and tougher competition. This squeeze on profit led many firms to cut staff.

Unemployment joined the concern. The overall rate went from 5.0% in June to 5.2% in July. Youth unemployment jumped to 17.8%, up from 14.5%. These changes may cut household spending and hurt consumer confidence. Retail sales growth also slowed to 3.7% in July, down from 4.8% in June. In response, Beijing started a consumer loan subsidy program to boost household spending and the domestic economy.

Market Reactions and Outlook

On September 4, financial markets reacted with losses. The CSI 300 and Shanghai Composite indexes fell by 2.24% and 1.71%. Hong Kong’s Hang Seng Index dropped by 1.2% in early trading. Investors worry about falling margins, weak external demand, and rising unemployment.

Reports say Chinese regulators may act to cool the stock market. They are thinking of removing bans on short selling. They also may add rules to limit speculative trading.

Even with this turbulence, Mainland markets still show year-to-date gains. The CSI 300 and Shanghai Composite have increased by about 10.4% and 11.5%. The Hang Seng Index has nearly a 25% gain, outpacing major global indexes like the Nasdaq Composite.

What Lies Ahead?

With the truce deadline near, all eyes turn to upcoming trade talks and the next economic reports. The services sector may soon show more signs of pressure or recovery. Finding a balance between handling trade risks and boosting local spending will be key for Beijing in the short term.

Investors and policymakers watch to see if new stimulus can slow the downward slide or if hotter US-China tensions will push markets into more risk in the weeks before the truce ends.

For continuing updates on China’s economic path and global market news, stay tuned to FXEmpire.

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China’s Services PMI Sparks Market Turbulence: Insights on AUD/USD and Hang Seng Trends

China Services PMI Shows Margin Challenges; AUD/USD and Hang Seng Fall

By Bob Mason
Updated: September 3, 2025, 02:42 GMT+00:00

China’s services sector grew in August. The latest Services Purchasing Managers’ Index (PMI) climbed to 53 from 52.6 in July. This rise signals economic progress and sparks hope for stronger GDP growth. Yet behind the headline, data show firm pressure on profit margins that affected markets. The Australian dollar (AUD) and the Hang Seng Index felt these effects.

Services Sector Growth and New Business Increase

China’s service data connect government moves and market action. New business grew at its fastest pace since May 2024. Export orders increased, and foreign demand helped push the sector upward. This link hints at a stronger third quarter ahead.

Still, the survey shows ongoing issues. Even with more new business, many companies cut workers for the second time in three months. Wage hikes and higher raw material prices kept input costs rising for the sixth month in a row.

Margin Squeeze and Price Pressure

A key point in the August PMI survey is the narrow profit margin that firms face. Input costs climbed, but price gains failed to match. Short ties between rising costs and falling output prices squeezed profit. Some firms reduced staff even as demand grew, which may affect both jobs and local spending.

A related indicator, the RatingDog China General Composite PMI, rose from 50.8 in July to 51.9 in August. This score, which pairs manufacturing and services data, shows growth can happen even as margin challenges stay linked to the rising costs.

Expert Insights

Yao Yu, founder of RatingDog, spoke on the numbers. He said:

“China’s service sector in August showed clear signs of progress. Still, the pressure on prices and profits hints that the recovery is not even. Even if this short-term rise supports business, the weight on profits might slow things down over time.”

He pointed to the need for better price passing and stronger local demand. These factors will decide if China’s recovery can hold.

Market Reaction: Hang Seng and AUD/USD Decline

Following the PMI data, markets reacted with caution. The Hang Seng Index first rose 0.85% to 25,713, then hit a brief peak of 25,741 before dropping to 25,535. By the morning of September 3, it held near 25,534 as investor feeling stayed mixed.

In foreign exchange, the AUD/USD pair moved sharply. The Australian dollar jumped to $0.65248 after the report. Soon it pulled back to $0.65209 as traders weighed the cost issues. Later that day, the pair lost 0.33% to $0.62752. Since Australia and China trade closely, these numbers remain linked, along with signals from US trade views.

Looking Ahead: US-China Trade Talks and a Wider View

Trade between China and the US stays at the center of market views. Talks with China’s trade lead Li Chenggang and US officials bring hope for change. Recent statements from ex-President Trump, who criticized India and others at a summit, might spark market shifts.

If lower tariffs come into play, firms could face less cost pressure and see more hiring. Strong hiring can boost local spending and help maintain GDP near 5% this year. More jobs would support both domestic markets and overall growth.

Conclusion

China’s services sector shows steady growth and a return to business activity. New business gains and strong export orders spur progress. Still, higher input costs, pressure on profit margins, and hiring cuts remind us of the challenges ahead. These factors have stirred market shifts and touched key markers like the Hang Seng and AUD/USD.

Investors and policymakers will keep an eye on whether companies can manage rising costs and pass prices effectively. They will also follow US-China trade talks, which will play a key role in China’s near-term market path.

For continuous updates on global markets and economic indicators, visit FXEmpire.

About the Author
Bob Mason has over 28 years of experience in the financial industry. He covers currencies, commodities, alternative assets, and global equities with a focus on European and Asian markets.

Full money-growing playbook here: 
youtube.com/@the_money_grower

Navigating Economic Turbulence: China’s Struggle Between Growth Aspirations and Rising Unemployment

China Faces Tough Balancing Act: Growth Goals vs. Rising Jobless Pressure

By Bob Mason
Updated: September 2, 2025, 02:43 GMT+00:00

China now moves through a hard economic stage. The state aims for a 5% GDP rise. It sees more job losses, price cuts, and weak foreign demand. New facts show a mixed scene. Beijing must keep growth and job balance while handling global trade.

Manufacturing PMI Beats Hopes, Yet Problems Stay

China’s factory work gives some hope. The RatingDog China General Manufacturing Purchasing Managers’ Index jumped from 49.5 in July to 50.5 in August. The change to over 50 marks a move into growth. New orders reached high points unseen since March. Selling prices now hold steady after eight months of falls, easing worries of price drops.

Still, factories face high input costs. Input price rise hit a top mark since November 2024. These costs, plus ongoing job cuts, make work tough. Factory profits dropped 1.7% from January to July, and this fall continues from June.

EV Price Cuts and Job Losses Hit Profit Edges

A strong cost drop shows in electric vehicle makers. All top 20 EV brands had price slashes in July, as noted by China Beige Book. Price cuts squeeze profit edges. Companies now trim costs and reduce staff.

Job loss grows too. Overall unemployment edged up from 5.0% in June to 5.2% in July. More new college graduates crowd the job market. Youth job loss jumped to 17.8% in July, up from 14.5% in June.

Yet EV makers still post strong results. In August, NIO sent 31,305 vehicles—a 55.2% rise over last year. Xiaopeng Motors sent 37,709 units—a rise of 169%. September may show even more, as car buyers keep coming despite low prices.

Brian Tycangco, editor at Stansberry Research, views the fierce scene. He sees that a few Japanese and Korean brands—Toyota, Honda, Kia/Hyundai, and Vinfast—may stand strong. This may help local EV makers hold their ground.

Strengthening BRICS Ties to Ease US Trade Strain

Outside China, world demand stays weak. Trade talks, especially with the US, add strain. Beijing now works closer with BRICS nations like India, Russia, and Iran. The goal is to split from Western trade routes and ease US tariff strain.

At a recent meet, President Xi Jinping spoke on fair play and fair trade. He said nations must work more on trade, green energy, science, tech, and AI. This plan seeks to build stronger world trade links. It aims to give China and friends new trade paths. Yet, the US warns of tariff hits on BRICS nations that stray from using the dollar. An upcoming US election leaves more unknowns in trade talks.

Mainland Chinese Stocks Climb on Stimulus Hopes

Chinese stocks rise on news and new support steps. On September 1, the CSI 300 and the Shanghai Composite Index hit top levels for 2025. They rose by 0.60% and 0.46%, and the CSI 300 hit heights not seen since March 2022. The Shanghai Composite nears a 10-year top.

This year, both indexes increased about 15%. They did better than the Nasdaq but lag behind Hong Kong’s Hang Seng Index. Investor trust grows from hopes that Beijing’s steps will keep the growth going.

Some experts warn that gains may slow if new support stops, if trade fights grow, or if BRICS countries quarrel.

Looking Ahead: Services PMI and New Trade Talks

China’s near future depends on new stats and global moves. The RatingDog China General Services PMI, due on September 3, will show how strong the home market is.

Meanwhile, fresh US-China trade talks and more aid moves will shape how investors feel and what lies ahead. Leaders must work to keep growth, hold jobs, and face global doubts.

China works now to stay on course. Its mix of home changes and world ties will guide what comes next.

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