Month: September 2025

Cooling US jobs market becoming more apparent

There has been quite a sizeable reaction to [yesterday]’s softer-than-anticipated job openings numbers with 24bp of a potential 25bp rate cut now priced for September (up from 23bp) while the cumulative cuts priced by the December FOMC meeting are now 58bp versus 55bp before the data. (…)

Job openings fell to 7181k in July from a downwardly revised 7357k in June (consensus 7380k) while the daily data from job postings website Indeed had pointed to a decent increase. The report also indicated a notable pick-up in layoffs from the previous trend with sizeable upward revisions.

The chart below shows the ratio of job openings (vacancies) to the number of unemployed Americans has dropped below 1 for the first time since the beginning of 2018 (excluding the pandemic), which is a clear signalling of a weakening jobs market with wage pressures quickly evaporating.

Remember that in 2022 we had seen the quits rate peak at 3%, which led to real concern about staff retention that fuelled the pay rise boom. Well, today, we are down at just 2%, which is in line with historical rates of job churn that is consistent with wage growth slowing to just 3%. (…)

Ratio of job openings to the number of unemployed Americans drops below 1

Source: Macrobond, ING

Meanwhile, yesterday’s ISM manufacturing employment component was in deep contraction territory, suggesting a fourth consecutive monthly fall in manufacturing payrolls on Friday. It all hints that the Fed will be cutting rates pretty meaningfully over coming months – we expect them to cut 25bp at the September, October and December FOMC meetings.

• Labor Demand Continues to Erode

The latest reading on job openings further demonstrates that demand for workers is tepid. Job openings fell more than expected to 7.2 million in July. Smoothing over the past three months, job openings have averaged 7.4 million, down only modestly (2.5%) over the past year.

The weaker-than-expected outturn aligns the JOLTS data with weak payroll growth recently. Yet, even with the decline in July, the job opening rate has been vacillating between 4.3-4.8% since the end of 2024, not too far from pre-pandemic averages. Separate data from Indeed show job postings stabilizing the past two months, while the share of small businesses planning to hire has also edged up since the spring. In short, there are tentative signs of labor demand is stabilizing after being rocked by policy uncertainty earlier this year, but the overall trend remains muted.

Underlying paralysis in the jobs market continued in July. The layoff rate was unchanged at 1.1%, consistent with initial jobless claims moving sideways and firms being reluctant to let go of existing workers. Yet, firms are simultaneously hesitant to bring on new workers. The hiring rate held at 3.3% in July, keeping it near its lowest level in more than a decade (excluding the pandemic). Amid dwindling job opportunities, workers continue to stay put. The quit rate held at 2.0% in July, but is at risk of edging down in the coming months as the labor differential (i.e., the share of consumers who rate jobs as “plentiful” less “hard to get”) fell to a four-year low in August.

Overall, while there are few signs of the jobs market unraveling, the current balance remains tenuous. With hiring subdued, low layoffs remain the linchpin to keeping net employment growth in the black. Although economic policy uncertainty has retreated somewhat since the spring, we suspect that the slower pace of consumer spending and cost pressures related to tariffs will keep the pressure on businesses to look for cost savings where they can, including their workforce.

July 30, 2025: Jay Powell’s post FOMC presser:

In the labor market, conditions have remained solid. (…) Overall, a wide set of indicators suggests that conditions in the labor market are broadly in balance and consistent with maximum employment. (…)

The labor market is solid. (…)

So you do not see a weakening in the labor market. You do see a slowing in job creation, but also in a slowing—a slowing in the supply of workers. So you’ve got a labor market that’s in balance, albeit partially because both demand and supply for workers has—is coming down at the same pace, and that’s why the unemployment rate has remained roughly, roughly stable, which is why I said there—we do see downside risk in the labor market. (…)

So the labor market looks, looks solid. (…)

But, as I mentioned, you know, downside risks to the labor market are certainly apparent.

(…) we have a very good labor market right now. (…)

So I think if you take the totality of the labor market data, you’ve got a solid labor market. But I think you have to see that there are downside risks. It’s not—you don’t see weakening in the labor market, but I think you’ve got downside risks in a world where unemployment’s being held down because both demand and supply are declining. (…)

So the labor market is actually still quite solid.

Solid, even “quite solid”; “you don’t see weakening in the labor market, but I think you’ve got downside risks”.

Two days later, the BLS reported July job growth at 73k and revisions bringing May and June at 16k.

August 22, 2025: Jay Powell’s Jackson Hole statement:

Overall, while the labor market appears to be in balance, it is a curious kind of balance that results from a marked slowing in both the supply of and demand for workers. This unusual situation suggests that downside risks to employment are rising. And if those risks materialize, they can do so quickly in the form of sharply higher layoffs and rising unemployment.

At the same time, GDP growth has slowed notably in the first half of this year to a pace of 1.2 percent, roughly half the 2.5 percent pace in 2024 . The decline in growth has largely reflected a slowdown in consumer spending. (…)

In the near term, risks to inflation are tilted to the upside, and risks to employment to the downside—a challenging situation.

FYI, GDP slowed in Q1 but bounced +3.3% in Q2 in spite of consumer spending at 1.6%. Q3 GDP now seen at 2,2% (NY Fed) or +3.0% (Atlanta Fed). Consumer spending jumped +4.0% a.r. in July.

Thankfully, amid all these fluctuations in data and assessments, we will get the August BLS employment report tomorrow, the first release since the new Trump appointment…

Today we get the Services PMIs from real world purchasing managers which don’t revise their observations. Alas, there are 2 PMI surveys in the US and they recently did not agree at all .

Yesterday’s JOLTS release boosted expectations for a September rate cut. But that was July and it merely brought the JOLTS data more in line with Indeed Job Postings which, through August 22, have stopped declining, even rising 2.0% since their mid-July through.

Downside Risks to Job Growth Over the Coming Months

Sentiment indicators for consumers and firms are pointing to a weaker employment report for August.

First, consumer sentiment about the outlook for the labor market has historically been a leading indicator for job growth. Using the historical relationship to predict the August employment report suggests that nonfarm payrolls on

Friday could come in lower than the 90,000 expected by the consensus, see the first chart below.

Second, small businesses saying that they are experiencing poor sales has also been a leading indicator for the unemployment rate, and the current reading suggests the unemployment rate could rise over the coming months, see the second chart.

The bottom line is that sentiment indicators are suggesting that the labor market will continue to weaken.

  

Trump’s trade war bruises Brand USA

Brand USA is losing its luster: There’s less appetite around the world to buy American as the United States’ reputation plunges in the wake of President Trump’s trade war.

Companies accustomed to a boost just because they come from the U.S. are struggling to adapt.

“The aura around America has dimmed a bit,” McDonald’s CEO Chris Kempczinski told CNBC this week. Even so, sales for the fast-food giant are holding up so far, he said.

• Other well-known American brands are feeling the pressure, too.
• Brown-Forman, the company that makes U.S. booze brands Jack Daniel’s and Woodford Reserve, saw sales drop after American alcohol was taken off the shelves in some Canadian provinces in protest of tariffs, CEO Lawson Whiting said in an August investor call.
• Tesla has also taken a big hit to its brand this year in Europe, a result of CEO Elon Musk’s entanglements with the White House.

Companies’ reputations have long been tied to their country of origin’s global standing — particularly fast-food and beverage businesses.

• Brands like Coca-Cola and General Motors, or even Facebook, are inextricably tangled up with their American identities.

Globally, America’s favorability rating started declining in earnest in January when Trump was elected. It plummeted after his Liberation Day tariff announcement in April, according to data tracked by business intelligence firm Morning Consult.

Data: Morning Consult. Chart: Axios Visuals

The firm surveys adults across approximately 42 markets in Europe, the Americas, Asia and the Middle East, to assess whether they have a positive or negative view of the U.S.

• Globally, the average U.S. favorability rating is at -3.24. (That is, more folks have a negative view than a positive one.) It’s been in negative territory since April — though it’s bounced back slightly from its April bottom.
• In January, America had a positive favorability rating of 15.34.

Though there have been ups and downs in America’s global standing, it’s “typically been a benefit,” says Sonnet Frisbie, deputy head of political intelligence at Morning Consult. Companies didn’t have to consider America’s rep much before, but now they’re worried, says Frisbie, and looking for ways to adjust strategically. (…)

Ocean Shipping Rates Sink as Importers Balk at Trade Upheaval A 68% decline in shipping costs shows how retailers and manufacturers are pulling back on orders earlier than usual this year

Ocean shipping rates from China to the U.S. West Coast have fallen 68% from their June high, a sign this year’s peak shipping season was earlier and shorter than usual.

The rate slide also signals that some U.S. retailers and manufacturers are taking a cautious approach to new orders ahead of the year’s busy fall and winter shopping periods amid tariff uncertainties, shifting trade policies and concerns about consumer spending. (…)

“Shippers are telling us it’s really hard to plan right now,” said Michael Aldwell, executive vice president of sea logistics at Kuehne + Nagel International, one of the world’s largest freight forwarders.

Aldwell said some importers are reducing inventory levels because of economic uncertainty. Others are still drawing down inventories they rushed in earlier this year to get ahead of tariffs. (…)

The National Retail Federation forecasts that U.S. importers in September will bring in 1.83 million containers, measured in 20-foot equivalent units, a decrease of almost 20% compared with last year. The group’s Global Port Tracker forecasts monthly year-over-year import declines of between 19% and 21% through the rest of the year.

Homegrown robots help drive China’s global export surge

Chinese factories are installing about 280,000 industrial robots every year, or half the global total, bringing the country’s robot-to-worker density ahead of Germany and closing in on leader South Korea, according to the International Federation of Robotics.

Data from Chinese research group MIR Databank shows that about half of those robots are made by domestic groups such as Chengdu CRP Robot Technology, which has won local customers by undercutting global rivals on price.

“Not everyone needs an Audi A8. For many scenarios our functionality and stability will suffice,” said CRP’s chief Li Liangjun. His welding robots sell for about 60 per cent of the price of Japanese rivals Yaskawa and Fanuc, and those from ABB and Kuka. (…)

“With each robot, our labour costs come down by half and our efficiency increases,” said Song Ling, deputy manager of Shuangsheng New Energy Vehicle, the small company which owns the factory. “There is no choice but to automate.”

Over the past three years, Shuangsheng has automated about half of its production line, opting to buy dozens of locally made machines after testing them against several from Japanese groups. The factory is now shipping growing volumes of Rmb6,000 cargo-carrying carts and tuk-tuks to south-east Asia as well as Africa and the US. 

CRP’s chief Li said local factories were buying his more affordable Chinese robots to make a variety of low-end goods, including three-wheeled carts, furniture, fitness equipment and bicycles.

“In the past China relied on its large population of 1.3bn people and abundant cheap labour to gain its status as a manufacturing powerhouse,” Li added. “Now China is maintaining its labour advantage with robotic labour instead of human labour.”

At Shuangsheng, dozens of CRP robots began replacing welders who could demand monthly wages of up to Rmb15,000. The government hopes many blue collars workers can upgrade their skills into an expanding “purple collar” workforce of robot technicians. (…)

In the southern textile hub of Keqiao, Jay Ye, owner of Shaoxing Longkai Textile, has purchased several massive printing and embroidery machines to replace workers and increase productivity.

Ye said the locally made machines had helped double his factory’s output while increasing profit margins. “In India they are still embroidering by hand,” Ye said. “We are using machines.”

MAGA?

This was before AI…

Nvidia’s Jason Huang:

• “Everything that moves will be autonomous someday,” he said, noting that every company will have two factories: one for production, and one to produce the AI that manages production.
• “We’re working towards a day where there will be billions of robots, hundreds of millions of autonomous vehicles, and hundreds of thousands of robotic factories that can be powered by Nvidia technology”

Global manufacturing output, new orders and employment all return to growth in August

The J.P.Morgan Global Manufacturing PMI® rose to 50.9 in August, from 49.7 in July, to signal a slight improvement in operating conditions. Production increased for the second time in the past three months in August, with the rate of expansion accelerating to a 14-month high. (…)

Manufacturing new orders rose for the only the second time in the past five months in August (…). Panel members reported that tariff concerns continued to weigh on international trade flows, with new export business contracting for the fifth month in a row. (…)

Price pressures ticked higher in August, with rates of increase in input costs and selling prices accelerating to six and four-month highs respectively. Inflationary pressure was especially marked in the US, which saw the steepest raise in output charges and the second-fastest increase in input costs (behind Romania) of the nations covered.

USA: Surge in production underpins strongest improvement in manufacturing performance since May 2022

S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI^®), posted 53.0 in August. That was up from 49.8 in July and marked the strongest improvement in operating conditions since May 2022.

A surge in manufacturing production was signaled during August, with production rising to its steepest degree since May 2022. Growth reflected a combination of higher new orders and inventory building.

On the demand side, new work placed at US manufacturers rose for an eighth successive month, with growth improving noticeably since July, when order book gains broadly stalled. However, the increase in new work was principally domestic focused as international sales declined marginally for a second month in a row. Tariffs and associated trade uncertainty were again reported to have weighed on foreign demand.

With output rising more quickly than new work, firms were subsequently able to build their inventories of finished goods. Growth was solid and the sharpest in 13 months. Inventory accumulation was in part reflective of worries over future price developments and possible supply constraints in the months ahead.

Indeed, on the price front, input cost inflation accelerated in August and was the second-sharpest in the past three years (surpassed only by June). Tariffs were overwhelmingly reported to have pushed up operating expenses over the month and, wherever possible, were passed on to clients through an upturn in selling prices. Although still lower than June’s near three-year record, output price inflation remained substantial and well above trend.

On the supply-side, average lead times improved marginally in August amid some evidence of increased vendor capacity. Delivery times shortened despite a further increase in demand from US manufacturers, with purchasing activity reported to have risen (albeit slightly) for a fourth month in a row. There remained some evidence of higher buying to help bolster input stocks, which rose in August. Growth was however marginal and noticeably slower than May’s survey record increase.

Despite survey respondents commenting on an uncertain business outlook, especially around tariffs, overall confidence about future output improved since July. Demand, especially from domestic markets, was seen as picking up in the year ahead. Plans to invest in new plants and product lines were also noted by some manufacturers.

Some positivity regarding future production, alongside a rise in present sales, led to an increase in staffing levels during August. Growth was solid and not far off June’s near three-year high. Nonetheless, capacity remained under some pressure as signaled by the steepest rise in backlogs of work since September 2022.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence

“Purchasing managers reported that the US manufacturing was running hot over the summer.

“The upturn is in part being fueled by inventory building, with factories reporting a further jump in warehouse holdings in August due to concerns over future price rises and potential supply constraints. These concerns are being stoked by uncertainty over the impact of tariffs, fears which were underpinned by a further jump in prices paid for inputs by factories, linked overwhelmingly by purchasing managers to these tariffs. (…)”

The more widely followed and mediatized ISM survey remained weak however. Bloomberg headlined “Manufacturing shrinks again”

• August Marks Sixth Month of Contraction for Manufacturing ISM

The ISM manufacturing index rose to 48.7 in August, but remained consistent with contraction in the sector for the sixth-straight month. In one line — manufacturers continue to struggle in the face of uncertainty around tariff impacts. There was a level of pessimism across nearly all of the select industry comments, with respondents mentioning tariffs, including uncertainty around costs and sourcing concerns which are limiting new equipment spending.

(…) But new orders popped to 51.4 in August, the highest reading since the start of the year with eight industries reporting growth.

(…) the index reading is still consistent with a broad expansion in input prices with 15 industries reporting increased prices for raw materials last month. As seen in the nearby chart, this component is still running higher than where it averaged in the past two-or-so years ahead of the recent tariff-induced pop in input prices, and when you ask purchasing managers tariff-induced costs are a major challenge.

Source: Institute for Supply Management and Wells Fargo Economics

The employment component rose modestly to 43.8, but only two industries reported growth during the month with 13 reporting a drop and the trend decline in the employment index remains in place. The release sums up the current employment situation well, “For every comment on hiring, there were four on reducing head count as companies continued to focus on accelerating staff reductions due to uncertain near- to mid-term demand.”

(…) One respondent from the Computer & Electronic Products industry mentioned, “Tariffs continue to wreak havoc on planning/scheduling activities … Plans to bring production back into U.S. are impacted by higher material costs, making it more difficult to justify the return.”

Another respondent from the Electrical Equipment, Appliances & Components industry mentioned layoffs of high-skilled workers. Uncertainty around tariff policy is limiting activity. While the higher costs associated with tariffs are a challenge, the uncertainty around where tariffs ultimately land is likely more-so limiting current activity today.

I side with S&P Global’s more upbeat survey, helped by 82% of S&P 500 industrial companies beating estimates in Q2 with earnings up 4.2% on revenues up 4.3%. Q3 earnings are forecast up 16.7%, inconsistent “with contraction in the sector for the sixth-straight month.”

Later this morning we get the Services PMIs where S&P Global data was also much stronger than the ISM last month.

Canada: Downturn in manufacturing sector continues to ease during August

Canada’s manufacturing economy remained inside contraction territory during August, with output, new orders and employment all declining since July albeit at noticeably slower rates compared to earlier in the year. A lack of demand, especially from international markets due to tariffs, was again widely noted by manufacturers. Tariffs also continued to underpin inflationary pressures, with prices rising to a stronger degree than in July, whilst custom delays and logistical challenges led to a further lengthening of lead times.

US clients remained a key source of lower overall international sales in August.

On the price front, tariffs were overwhelmingly mentioned as having raised the cost of inputs, with metals like aluminum and steel especially impacted. Input price inflation overall was at its highest level for three months, and firms were keen to pass these on to clients wherever possible. This was reflected in a slightly firmer rise in output charges compared to July.

Confidence in the future meanwhile improved but remained well below trend. Continued uncertainty in the outlook, plus present sales weakness, led firms to make further cuts to employment and purchasing activity.

ASEAN manufacturers register strong output growth in August

Following signs of broadly stabilising operating conditions in July, as indicated by the S&P Global ASEAN Manufacturing Purchasing Managers’ Index™ (PMI®) registering 50.1, August saw the index rise to 51.0. The health of the manufacturing sector improved modestly, but to the strongest degree in six months.

The rise in the headline index was supported by a solid and stronger increase in production, as well as a renewed, albeit a modest uptick in new orders. Output has now risen for a second consecutive month, with the rate of growth in August the fastest since mid-2024. Additionally, the fresh uptick in new orders effectively ended the previous four-month sequence of decrease. (…)

Services PMIs

Eurozone economy continues to grow at a sluggish pace

The HCOB Eurozone Services PMI Business Activity Index dipped from July’s four-month high of 51.0 to 50.5, signalling a slower and marginal increase in output in August.

Demand for eurozone services was virtually flat, with the respective index posting only fractionally above the 50.0 no-change level. New business from overseas was a stronger drag on sales performances midway through the third quarter as new export orders fell at the fastest pace in three months. (…)

The seasonally adjusted HCOB Eurozone Composite PMI® Output Index ticked up to a one-year high of 51.0 in August, from 50.9 in July. The latest data point extended a run of above 50.0 prints seen since the start of the year, although the pace of expansion signalled remained muted. Growth was held back by the service sector, which posted a marginal and slower upturn. Manufacturing, on the other hand, saw its strongest rise in production in almost three-and-a-half years.

Of the eurozone nations with Composite PMI data available, August’s survey results indicated that Spain was the fastest-growing economy, despite the pace of expansion easing. Growth slowdowns were likewise seen for Ireland and Germany, whereas Italy recorded a slightly faster upturn. France remained the weakest-performing eurozone economy, although there were signs of stabilisation as the Composite Output PMI rose to a 12-month high to post only narrowly below the 50.0 no-change threshold.

There was an improvement in demand conditions for eurozone businesses in August as new orders increased for the first time since May 2024. Factory sales were the principal driving force as new work received by services companies was up only fractionally on the month. Subsequently, the overall rate of expansion was marginal.

New business growth reflected domestic market movement, underlying data suggested, as new export orders shrank in August to extend the current sequence of deteriorating international demand to three-and-a-half years. Furthermore, the latest contraction was the quickest since March.

With activity growth outstripping that for new business, eurozone companies made additional inroads into their backlogged work midway through the third quarter. That said, the rate of depletion was the softest for almost two-and-a-half years and only slight.

The hiring trend seen since March continued into August, with private sector employment in the euro area rising for a sixth consecutive month. The rate of employment growth also ticked up to a 14-month high. The improvement at the composite level reflected stronger hiring at services firms as factory workforce numbers shrank further.

Business confidence was broadly unchanged since July, ticking down a fraction. This nevertheless brought it to its lowest level in three months. On balance, eurozone companies were optimistic of growth over the next 12 months, but the degree of positivity was below its long-term average.

• ECB Should Keep Rates Steady, Schnabel Tells Reuters
• ECB’s Villeroy Says Euro-Zone Inflation Is Well Under Control
• ECB’s Muller Says It Makes Sense to Hold Rates and Watch Economy
• ECB’s Kocher Advocates Caution Ahead of Next Decision
• ECB’s Next Move Could Be to Cut or Hike Rates, Dolenc Says

China: Services activity growth accelerates to solid pace in August

The headline RatingDog China General Services Business Activity Index rose to 53.0 in August, up from 52.6 in July. Posting above the 50.0 neutral mark, the latest reading indicated another expansion of services activity in China, thereby extending the current period of growth that began in January 2023. Furthermore, the rate of increase was the fastest seen since May 2024 and solid.

Central to the latest upturn in services activity was a stronger rise in new business. The rate of new order growth accelerated for a second successive month and was likewise the steepest seen since May 2024. This was partly supported by a stronger rise in new export business, which increased at the fastest rate since February. Comments from panellists often mentioned successful business development efforts, improvements in market conditions and increased tourism as key drivers of sales growth.

In addition to spurring growth in services activity, the latest uptick in new business also contributed to another accumulation of outstanding business in August. This marked the fifth time in as many months in which backlogs of work have expanded, with the rate of growth quickening from July.

Despite rising workloads, Chinese service providers signalled a fresh fall in staffing levels in August. Headcounts have now fallen in two of the past three months, with the latest reduction attributed to both the non-replacement of job leavers and redundancies, partly due to concerns over costs.

Indeed, average input costs continued to increase in August on the back of higher wages and raw material costs, according to panellists. This marked the sixth successive month of cost inflation, though the latest upturn was only fractional. Against a backdrop of intense market competition, services firms opted to absorb cost increases and lowered their output charges to support sales.

Business sentiment regarding the one-year outlook remained positive across the service sector in August, with the level of confidence unchanged from July and the joint-highest in five months. Companies often hoped that better market conditions and internal growth plans would stimulate business activity growth in the year ahead.

The Composite Output Index posted above the 50.0 no-change threshold at 51.9 in August, up from 50.8 in July. This indicated that overall output increased for a third straight month and at the quickest pace since last November. Growth was broad-based by sector, and led by services.

How Tariffs Hurt My American Factory Some of my rivals that produce overseas will be less hard-hit.

(…) Matouk is an American maker of luxury bed and bath linens, founded by my grandfather in 1929. While much of our industry has abandoned domestic production, we have built a profitable production operation in Fall River, Mass., where we have nearly 200 manufacturing employees.

Ironically, these new, steep tariffs will damage our domestic manufacturing operation and make us less competitive than some rival companies that rely only on foreign production. Over the past 20 years, we have invested consistently in our American operation, which depends on a global supply chain that delivers material and equipment for production to Fall River.

These fabrics and machines aren’t available in the U.S. and, in my opinion, never will be. The majority of our competitors produce their goods entirely abroad and often in countries that are now more tariff-favored than India, where we buy many of our inputs. This means our American-produced goods are at a disadvantage, due to tariffs.

To supplement our domestically made product line, we also import products that are impossible to manufacture economically in America (by us or anyone else) because the skills and materials don’t exist here or because the costs are too high. (…)

There’s no way our overseas manufacturers can absorb these high taxes—which is what tariffs are. (…)

American manufacturers and importers must shoulder almost the entire burden. While we have borne these costs since Liberation Day in hope that the administration would choose a more reasonable policy by the Aug. 1 implementation deadline, we now reluctantly have to raise our prices to protect our business.

(…) we’re being punished for sticking with U.S. manufacturing—as are our employees, the businesses we sell to, and ultimately American consumers, who share in the cost of these higher taxes. (…)

U.S. Curbs TSMC’s Shipments of Chip Supplies to China The authorization will be revoked effective Dec. 31

Taiwan Semiconductor Manufacturing Co. said the U.S. is revoking its authorization to freely ship key equipment to its main Chinese chip-making site, a move that will make it harder for the company to operate in China.

The U.S. government informed TSMC of the removal of its “validated end user” status for its Nanjing site effective Dec. 31, the company said. The status allows TSMC to import American chip-making equipment for its existing China-based facilities without having to seek separate U.S. approval.

“While we are evaluating the situation and taking appropriate measures, including communicating with the U.S. government, we remain fully committed to ensuring the uninterrupted operation of TSMC Nanjing,” the company said. (…)

“The bigger story is Washington’s intent—this isn’t about today’s profits, it’s about freezing China’s chip capacity over the long term,” said Charu Chanana, chief investment strategist at Saxo Singapore.

The Biden administration first granted the waivers to foreign chip makers operating in China, including TSMC, Samsung Electronics and SK Hynix, after imposing restrictions on China’s semiconductor industry in 2022.

The Commerce Department said Friday that the authorization for Samsung’s and SK Hynix’s China plants will be revoked effective Dec. 31.

Former participants of the VEU program “will need to obtain licenses to export their technology, putting them on par with their competitors,” it said.

The Commerce Department added that it intends to grant export licenses to allow the companies to operate their existing facilities in China, but doesn’t intend to grant licenses to expand capacity or upgrade the plants’ technology. (…)

The three companies are among the few foreign chip makers with sizable China-based production sites. The U.S. move could make it harder for them to operate effectively in China over time, analysts said. (…)

The curb would further limit China’s access to semiconductors made by foreign vendors, with Chinese memory makers benefiting from an upside in demand, Citi Research analyst Kevin Chen said in a recent note.

“Each new restriction forces China to double down on homegrown innovation,” Saxo’s Chanana said. “The risk for the U.S. is that the very pressure meant to constrain Beijing may end up accelerating the race for self-sufficiency in chips.”

Bond Traders Sing the Blues Heavily indebted governments are increasingly vulnerable to bond vigilantes.

Pity the bond traders of the world, who after Tuesday must wish they’d stayed on their late-summer vacations. A global rout in sovereign debt greeted Wall Street’s return to the office, and the only folks suffering more heartburn than those traders are the poor saps tasked with managing national treasuries.

The trouble started in Europe. Yields on 10-year German, French, Italian and Dutch government debt (among others) all surged. Britain’s 30-year gilt at 5.7% hit a level not seen since 1998. In the U.S., the 10-year Treasury yield at less than 4.3% remains reassuringly below its heights earlier this year, but the 30-year is nearing 5%.

It’s easy and not entirely wrong to blame this on investors’ recognition that most governments are borrowing far too much today and confront mammoth social-spending commitments in the future. But this isn’t news.

Even the political instability in France and policy cluelessness in the United Kingdom on display have been there for all to see for a long time. The only discernible fiscal “surprise” in recent days was the prospect in the U.S. that a court ruling against President Trump’s tariffs could cut off that revenue stream.

A more likely trigger for Tuesday’s bond selloff is renewed concern over inflation. Prices rose an unexpectedly rapid 2.1% year-over-year in the eurozone in August, data released Tuesday showed. Yet the European Central Bank, like the Federal Reserve and Bank of England, seems unlikely to act aggressively if it turns out the postpandemic inflation isn’t entirely beaten. Investors may start assuming that somewhat higher inflation will be with us in most places for the foreseeable future. (…)

Rejoice, we have true bond markets again.

The bigger problem is that the enormous debt burdens of Western governments leave their fiscs exposed to market swings. A warning emerged from the U.K. on Tuesday. The government sold a record £14 billion of 10-year gilts at around 4.88%, the highest yield since 2008. As politicians borrow more to fund current expenditure, they must do so at higher interest rates.

Ditto the existing pile of debt, which must be rolled over from time to time. This is one reason the U.S. Treasury under Secretary Scott Bessent is issuing more lower-rate, short-term bills. It’s becoming normal for debt-service costs to exceed defense budgets.

A one-day bond selloff isn’t cause for panic, and for the most part Tuesday’s isn’t. But politicians’ enthusiasm for debt-fueled spending could one day transform a routine down day in the bond market into a fiscal crisis. Be grateful that we’re probably not there—yet.