Key Points

• Tariff Legal Uncertainty & Jobs Data in Focus: A U.S. appeals court rejected Trump’s tariffs, heightening legal uncertainty, while Friday’s nonfarm payrolls report is expected to cement Fed rate cut bets.
• Alibaba Surges on Cloud Growth & AI Chip Plans: Shares jumped 19% in Hong Kong as accelerating cloud sales and reports of a new AI chip boosted investor confidence in its AI and instant commerce strategy.
• Asia Markets Mixed on China PMI & Tariff Ruling: RatingDog PMI improved to 50.5, lifting Chinese equities, while Japanese and Korean markets declined; investors also weighed a U.S. court ruling against Trump’s tariffs.
• India-China Rapprochement Signals Strategic Shift: Modi and Xi pledged partnership over rivalry, discussing trade deficit reduction, resuming flights, and easing curbs, aligning strategically amid U.S. tariff pressures.

Tariffs, Jobs Data and China PMI in Focus

U.S. markets were closed for Labor Day, but global sentiment is shaped by three themes: legal uncertainty over Trump’s tariffs, anticipation of Friday’s jobs report, and signs of stabilization in China’s economy. A U.S. appeals court struck down the administration’s sweeping levies, setting the stage for a potential Supreme Court battle, while investors see an 87% probability of a Fed rate cut at the September 16–17 meeting.

China’s PMI returned to expansion territory at 50.5, lifting regional equities, and oil edged higher on supply risk, even as OPEC+ output weighed on the medium-term outlook.

Alibaba Surges on Cloud Growth and AI Bets

Alibaba’s Hong Kong-listed shares jumped 19% to their highest since March after strong results from its cloud division and reports of a new AI chip under development. Revenue for the June quarter rose 2% year-on-year to 247.65 billion yuan ($34.7 billion), missing estimates, but net income surged 78%, beating forecasts. Cloud revenue accelerated 26%, with AI-driven services maintaining triple-digit growth for the eighth straight quarter.

Investors welcomed the company’s strategic push into AI and “instant commerce,” even as near-term e-commerce margins came under pressure from heavy investment in ultra-fast delivery services.

Asia Markets Mixed as China Data Lifts Sentiment, Japan and Korea Lag

Asian equities closed mixed Monday as investors weighed China’s manufacturing signals and geopolitical developments. The RatingDog manufacturing PMI edged into expansion at 50.5, contrasting with the official PMI reading of 49.4, helping lift Hong Kong’s Hang Seng by 2.17% and China’s CSI 300 by 0.6%.

Gains were led by Alibaba, which surged nearly 19%. Japan’s Nikkei fell 1.24% as semiconductor stocks slumped, while South Korea’s Kospi dropped 1.35% and Australia’s ASX 200 lost 0.51%.

Indian benchmarks gained modestly. Regional sentiment was also shaped by a U.S. appeals court ruling deeming Trump’s “reciprocal tariffs” illegal.

India and China Emphasize Partnership Amid Tariff Pressures

Indian Prime Minister Narendra Modi and Chinese President Xi Jinping pledged to treat each other as partners rather than rivals during the Shanghai Cooperation Organization summit, signaling a strategic thaw after years of strained ties. Discussions focused on reducing India’s $99.2 billion trade deficit with China, resuming direct flights, and easing restrictions on rare earths and fertilizers, while affirming stability along their contested Himalayan border.

The alignment comes as both nations face U.S. tariff pressure, with Beijing openly opposing Washington’s levies on Indian goods. Analysts view the rapprochement as cautious but strategically significant for regional stability.

Conclusion

Legal battles over U.S. tariffs and the upcoming jobs report will shape expectations for Fed policy, while China’s improved PMI and India-China rapprochement highlight shifting dynamics in Asia.

Meanwhile, Alibaba’s strong performance reinforces the resilience of China’s tech sector despite broader uncertainties.

This week’s developments underscore the delicate balance between geopolitical shifts, trade disputes, and evolving market drivers. For investors, the interplay of policy, trade, and earnings signals both risk and opportunity. Staying agile, monitoring central bank actions, and positioning across resilient sectors and regions will be essential in navigating the months ahead.

Investment Insights

• Fed Policy in Focus: With a September rate cut highly probable, bond yields and equity multiples may reprice quickly; investors should watch labor data and inflation prints for confirmation.
• China Tech Momentum: Alibaba’s cloud-driven rebound and AI chip plans highlight domestic tech resilience; selective exposure to Chinese innovation leaders could capture growth despite regulatory headwinds.
• Asia’s Geopolitical Rebalancing: India-China engagement suggests easing regional risk premiums, creating scope for improved cross-border trade and investment flows in sectors like energy, EVs, and infrastructure.
• Liquidity-Driven Rallies: China’s stock surge reflects ample liquidity, but investors should remain mindful of valuation risks as fundamentals lag behind momentum.

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