Markets have had a relatively quiet start to the week, with investors awaiting a series of key economic releases due later in the week.
In Japan, wholesale prices rose by 6.8% in the year to September. Although this was a slowdown from the previous month, the increase highlights continued pressure on businesses from rising input costs. For the Bank of Japan (BoJ), the key question is whether these pressures will feed through into consumer prices and become more persistent. Uncertainty surrounding the conflict in the Middle East and its potential impact on energy prices adds to the challenge, potentially giving policymakers reason to hold interest rates steady at their next meeting while they assess the inflation outlook. Governor Kazuo Ueda has also stressed the importance of monitoring how wholesale price increases affect consumer inflation and, in turn, household spending.
China’s trade performance remained exceptionally strong in September, with exports and imports rising sharply year-on-year and driving a trade surplus that exceeded expectations. The cumulative surplus for the year has now reached $938 billion, keeping China on course to surpass the record level achieved in 2025. Much of this momentum continues to stem from robust international demand for technology and AI-related goods, with high-tech exports posting particularly impressive growth. Although elevated prices for semiconductors and key commodities have contributed to higher trade values, the figures also underline the durability of overseas demand despite continued weakness in domestic spending.
Elsewhere, there are tentative signs that trade tensions between the EU and China may be easing, following reports of an agreement to curb Chinese hybrid vehicle exports to Europe. The arrangement is expected to cut projected exports by more than 50% over the next four years, potentially reducing the number of Chinese vehicles entering the European market by several million. This could provide some relief for European manufacturers by easing competition from lower-cost imports. However, the agreement should be viewed in the context of the broader trading relationship. The EU’s trade deficit with China is estimated at around €1 billion per day, spanning a wide range of industries beyond automotive. As a result, any reduction in vehicle exports is unlikely to materially narrow the overall trade imbalance on its own.
Meanwhile, China’s largest domestic memory-chip maker, CXMT, has announced a server memory chip that it says could compete with technology Samsung is expected to offer by 2028. The announcement has drawn attention because server memory is a valuable segment of the semiconductor industry, supported by demand for the computing infrastructure needed to power artificial intelligence and data centres. CXMT claims its new technology could deliver 30% to 50% greater storage capacity than current chips, although the precise basis for that comparison and the chip’s eventual commercial performance will be important in assessing the significance of the development. If the technology can be delivered at scale and meet the necessary performance and reliability standards, it could increase competitive pressure on established suppliers such as Samsung and SK Hynix. Some Asian markets moved lower temporarily on Tuesday following the news, reflecting concerns about the potential implications for the sector.
US banks reported mixed third-quarter results on Tuesday, with consumer spending and business activity remaining resilient, although some areas of trading and lending income showed signs of weakness. JPMorgan Chase’s profits increased but fell short of expectations, while Wells Fargo beat earnings forecasts despite weaker-than-expected net interest income. Goldman Sachs benefited from stronger equities trading, while Citigroup also reported higher profits, although its shares fell. The wider market response was muted, with the S&P 500 closing virtually unchanged, while the Dow Jones and Nasdaq traded lower, but only moderately.
Still to come this week we have US inflation, PPI and retail sales data as well as UK GDP.
Nicola Tune, Portfolio Specialist