Key Points

• China Industrial Profits Surge: Profits rose 20.4% in August, led by upstream sectors as Beijing curbed excess supply and eased price competition.
• Sony Financial Group Debut: Shares gained 15.9% in Tokyo, boosting investor sentiment even as broader Japanese markets slipped.
• Global Market Moves: Equities firmed while the dollar eased; gold hit a record $3,819 amid U.S. shutdown risks and Fed policy expectations.
• Beyond AI: Investors are rotating into infrastructure, defense, healthcare, and energy as fiscal stimulus drives long-term opportunities.

China’s Industrial Profits Rebound 20% on Supply Curbs

China’s industrial profits jumped 20.4% in August, the strongest gain since late 2023, reversing three months of declines as Beijing tightened control over excess supply and price competition.

The rebound was driven by upstream industries, with raw material producers posting profit growth of 37.5% amid rising demand and prices. State-owned firms outperformed private peers, highlighting policy support in strategic sectors.

Still, the recovery remains uneven, with automakers and chemical producers reporting losses, while weak domestic demand and a sluggish property sector continue to weigh on the broader outlook, reinforcing expectations of further fiscal stimulus to stabilize growth.

Sony Financial Group Jumps 15% in Tokyo Market Debut

Sony Financial Group surged 15.9% in its Tokyo debut after briefly spiking 36%, valuing the unit at over $6.7 billion and underscoring investor appetite for financial services tied to the Sony brand.

The spin-off allows Sony to focus on semiconductors and entertainment while giving the financial arm room to raise growth capital independently. Broader Asia markets traded higher, with Hong Kong’s Hang Seng up 1.9%, the CSI 300 rising 1.5%, and South Korea’s Kospi rebounding 1.3%. Australia’s ASX 200 gained 0.9% ahead of the RBA’s policy meeting, where rates are expected to remain steady at 3.6%.

Global Stocks Rise, Dollar Slips as Shutdown Risks Loom

Global equities firmed while the dollar weakened as investors braced for a potential U.S. government shutdown that could delay key economic data, including September payrolls.

The MSCI All-World index gained 0.16%, with Europe’s STOXX 600 up 0.3% and U.S. futures higher, supported by seasonal quarter-end buying. Gold surged to a record $3,819 per ounce on safe-haven demand, while 10-year Treasuries found support at 4.16%.

Oil prices fell, with Brent at $69.34, as pipeline flows resumed from northern Iraq and OPEC+ signaled additional supply. Markets continue to price in high odds of Fed rate cuts in October and December despite the uncertainty.

Investors Pivot to Fiscal Spending Themes Beyond AI

Global investors are shifting focus beyond the AI-driven equity surge to sectors poised to benefit from sustained government spending on infrastructure, defense, healthcare, and energy transition.

UBS and Nuveen highlighted fiscal stimulus as a structural driver of markets, with commitments such as Germany’s €500 billion infrastructure fund and NATO’s pledge to raise defense outlays supporting long-term demand.

While the S&P 500’s 14% rise this year has been led by AI, Europe’s defense index has surged nearly 68%, reflecting fiscal priorities. Asset managers stress active positioning, balancing U.S. exposure with global opportunities in cyclical and inflation-hedging sectors.

Conclusion

Markets are balancing short-term policy risks with longer-term structural shifts. China’s industrial profit rebound highlights the impact of supply discipline, though weak demand signals remain a concern. In Japan, Sony Financial’s strong debut contrasted with broader equity softness, underscoring selective opportunities.

Globally, investors weighed U.S. shutdown risks, sending gold to record highs and Treasuries higher while equities showed resilience. At the same time, institutional focus is broadening beyond AI toward sectors tied to fiscal stimulus, including infrastructure, energy, healthcare, and defense. This mix of policy uncertainty and government-backed demand will continue to guide portfolio positioning into year-end.

Investment Insights

• China Commodities: Profit rebound supports upstream commodities, but persistent demand weakness argues for cautious exposure to downstream industries.
• Spin-off Opportunities: Strong appetite for Sony Financial’s debut highlights selective opportunities in spin-offs and corporate restructuring plays.
• Safe-Haven Demand: Shutdown risk and Fed uncertainty underpin demand for gold and Treasuries, reinforcing safe-haven allocations.
• Fiscal Themes: Stimulus is set to drive multi-year growth in infrastructure, defense, and energy transition, favoring active positioning in policy-linked sectors.

Economic Calendar