Key Points

• China’s Industrial Profits Fall: Industrial profits in China dropped 5.5% year on year in October, the steepest decline in five months, highlighting economic fragility, weak domestic demand, and deflationary pressure.
• AI Could Replace 11.7% of U.S. Wages: MIT’s “Iceberg Index” study shows AI can already replace tasks worth 11.7% of U.S. wages, affecting routine jobs across multiple sectors—not just tech.
• Markets Eye December Fed Cut: Global stocks are up amid an 85% market-implied probability of a December Fed rate cut, sustaining risk appetite despite intervention-sensitive yen levels.
• China Shifts AI Training Abroad: Chinese tech giants like Alibaba and ByteDance are moving AI training overseas to avoid U.S. chip curbs, revealing the reach of export controls and China’s strategic adaptation.

China’s Industrial Profits Slide as Growth Momentum Weakens

China’s industrial profits fell 5.5% year on year in October, the sharpest drop in five months and a reversal from double-digit gains in August and September, as renewed U.S. trade tensions and softer domestic demand weighed on margins. Profit growth for the first ten months slowed to 1.9%, with mining earnings down nearly 28% even as manufacturing and utilities posted mid-single-digit gains, underscoring diverging sector dynamics. Combined with a sub-50 manufacturing PMI, slowing retail sales and weak investment, the data reinforce a picture of an economy flirting with mild recession and lingering deflation risks, even as Beijing aims to hold GDP growth near 5%.

MIT Model Maps AI Exposure to 11.7% of U.S. Wages

A new MIT study using the “Iceberg Index” estimates that current AI systems could already replace tasks equivalent to 11.7% of the U.S. labor market, or about $1.2 trillion in wages, with exposure extending far beyond tech into routine roles in finance, HR, logistics and office administration. By simulating 151 million workers and 32,000 skills across 923 occupations and 3,000 counties, the model offers policymakers a granular view of where disruption may emerge and how reskilling dollars might be targeted. Early adopters such as Tennessee, North Carolina and Utah are using the tool to test training and investment strategies before committing large-scale funding.

Stocks Edge Higher as Markets Price in December Fed Cut and Watch Yen Risks

Global equities gained modestly in thin holiday trading, supported by rising confidence that the Federal Reserve will cut rates in December, with futures now implying around an 85% probability. European and Asian indices traded higher as tech and defense shares offset weaker healthcare names, while investors largely looked past earlier concerns about an AI bubble. The dollar softened against most majors but the yen remained in focus near 156 per dollar, with markets on alert for possible intervention and a potential Bank of Japan rate hike. With U.S. data distorted by the recent shutdown, investors are leaning heavily on Fed commentary, even as bitcoin rebounds above $90,000 and gold eases slightly.

Chinese Tech Groups Shift AI Training Offshore to Sidestep U.S. Chip Curbs

Chinese internet giants including Alibaba and ByteDance are reportedly training their latest large language models in Southeast Asian data centers to access Nvidia GPUs and work around U.S. export restrictions. According to the Financial Times, offshore training via leased, non-Chinese facilities has increased since Washington tightened rules on Nvidia’s H20 chip in April, highlighting how firms are re-routing AI workloads rather than slowing buildouts. DeepSeek, which stockpiled Nvidia chips before the bans, remains an exception, training domestically and collaborating with Huawei-led chipmakers, underscoring a dual track of overseas dependence and accelerated efforts to develop competitive Chinese AI hardware.

Conclusion

Global markets remain supported by rate-cut expectations, but today’s data point to underlying structural shifts and vulnerabilities. China’s profit slump and lingering deflation risk highlight a growth model under pressure just as its tech giants move AI training offshore to work around U.S. chip controls. In the U.S., MIT’s Iceberg Index underlines how current AI can already reshape a meaningful share of wages, raising medium-term questions for employment, productivity and policy. Against this backdrop, an anticipated Fed cut is a tailwind, but not a cure-all: investors need to distinguish between cyclical relief rallies and deeper regime changes globally ahead.

Investment Insights

• China Risk Is Shifting, Not Disappearing: Slower industrial profits and deflation pressure suggest China remains a drag on global growth, even as some sectors (manufacturing, utilities, autos, AI) hold up better.
• AI Is an Economic Force, Not Just a Market Story: If current AI can already touch more than 10% of U.S. wages, investors should think in terms of winners in productivity (software, automation, training) and potential pressure points in routine white-collar roles.
• Rate Cuts Help, but Don’t Solve Structural Issues: A likely Fed cut is supportive for risk assets in the short term, but it does not change longer-term questions around growth, demographics and technology-driven disruption. Balancing cyclical opportunities with structural themes remains key.
• Geopolitics Is Embedded in AI Supply Chains: Chinese firms moving AI training overseas to access Nvidia chips show how regulation and export controls are now part of the technology investment landscape. Investors should factor policy risk into AI hardware and cloud exposures.

Economic Calendar

Date	Event	Why It Matters
November 28, 2025	Canada Q3 GDP	Key update on Canadian growth that feeds into North American demand assumptions, commodity exposure and Bank of Canada policy expectations.
December 1, 2025	U.S. ISM Manufacturing Index (November)	High-frequency gauge of U.S. factory activity and new orders, closely watched for signs of cyclical momentum and confirmation of a soft-landing narrative.
December 2, 2025	Eurozone CPI (Flash, November) & Unemployment Rate (October)	Core inputs for ECB policy: inflation and labour slack together shape the outlook for further easing and the euro area’s real-rate environment.
December 2, 2025	U.S. JOLTS Job Openings (October)	Key barometer of U.S. labour-market tightness; a cooling openings rate would support the case for a more dovish Fed path in 2026.
December 3, 2025	U.S. ADP Employment Report & ISM Services PMI (November)	Early read on U.S. jobs and services-sector strength ahead of the official payrolls report, important for validating or challenging current Fed rate-cut expectations.