Dow Jones & Nasdaq 100 Rise as China Profits Jump, Fed Speakers in Focus
News Summary
China's industrial profits surged 20.4% year-on-year in August, reversing July's decline and rekindling hopes that Beijing could meet its 5% GDP growth target for 2025. This significant rebound, particularly in manufacturing, suggests Beijing's efforts to combat price wars, overcapacity, and deflation are gaining traction despite US tariffs. The US Core PCE Price Index increased 2.9% year-on-year in August, matching July's pace, which bolstered expectations for an October Fed rate cut. Consequently, US stock futures rallied on September 29, with the CME FedWatch Tool showing an 89.3% probability of a 25-basis-point cut in October. Global central banks have collectively cut rates 168 times over the last 12 months, signaling a global monetary policy pivot. The Federal Reserve, though one of the last to join this cycle, is expected to deliver two more rate cuts by year-end. Market participants are closely watching Fed speakers for policy guidance, while Chinese economic data and upcoming US jobs reports remain pivotal catalysts for Q4 market sentiment.
Background
As September 2025 draws to a close, Chinese economic data has been under intense scrutiny following a series of disappointing reports that fueled concerns about growth momentum. Beijing has set a 5% GDP growth target for 2025 and has been actively combating domestic price wars, overcapacity, and deflationary pressures, while also navigating ongoing US tariffs. Concurrently, major central banks globally have broadly pivoted towards easier monetary policy over the past year, with cumulative rate cuts reaching the third-highest level this century. Despite the Federal Reserve being a late entrant to this global easing cycle, market expectations are building for its imminent participation, supported by steady US inflation data like the Core PCE.
In-Depth AI Insights
Does China's industrial profit surge truly signal a sustained economic recovery, or is it a lagged effect of short-term policy stimuli? - The significant rebound in August industrial profits, particularly in manufacturing, likely reflects the initial effectiveness of Beijing's multi-pronged policies (including administrative intervention in price wars and capacity reduction), rather than a fundamental reversal of intrinsic market demand. - Given persistent pressures in the real estate sector, slow recovery in consumer confidence, and external demand impacted by US tariffs, the sustainability of this profit growth remains questionable. Investors should be wary of it being a one-off boost before the "Golden Week" holiday, rather than a long-term trend. - In the long run, China's structural economic issues (e.g., local government debt, demographic shifts) persist, and a single month's data is unlikely to reverse cautious expectations for the full year's economic targets. Profit growth might be more of a short-term fluctuation than a clear signal of robust recovery. What are the structural implications for the USD and risk assets as the Fed joins the global rate cut trend under President Trump's second term? - The Fed's rate cuts, particularly after stable inflation data, could be interpreted as aligning with President Trump's agenda to stimulate economic growth. This could lead to further dollar weakening, benefiting US exporters and multinational corporations. - As central banks globally cut rates, carry trades may resurface, especially with expectations of a Bank of Japan policy shift and Fed easing. This could drive capital flows into emerging markets and higher-risk assets, but also increases volatility risks in those markets. - The Fed's "late pivot" implies less room for future rate cuts compared to other central banks, especially when considering potential future inflation rebounds or financial stability risks. This limits its subsequent policy flexibility and could lead to increased market uncertainty regarding future policy paths. How will the interplay of US-China trade tensions and potential Chinese economic weakness shape the Q4 2025 global market outlook, particularly for the technology sector? - Despite the short-term rebound in China's industrial profits, a renewed escalation of US-China trade tensions (a higher possibility under the Trump administration) or renewed weakness in Chinese economic data would quickly offset market optimism, particularly impacting global tech stocks and export-oriented companies with significant exposure to the Chinese market. - For the technology sector, the trend towards supply chain regionalization and "friend-shoring" will accelerate. If China's economic growth falters, it will diminish its appeal as one of the world's largest consumer markets, directly affecting global tech product sales and profits. - Investors should closely monitor trade negotiation dynamics and leading indicators such as China's private sector PMIs. Any negative signals could trigger a flight of capital from high-risk, high-growth tech stocks to more defensive assets, portending a potentially volatile fourth quarter.