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MORNING BID EUROPE - China markets are the latest to catch AI fever

Wayne Cole gives us a look at what the future holds for European and global markets.

The market has had a difficult start to the month of September, with Wall Street away on vacation and much of Asia down. S&P futures are flat during what is usually a poor month. European share futures are hardly moving, but China is still well supported by liquidity seeking a home in the low-yielding world.

Chinese blue-chip stocks rose more than 10% in the last month. This was aided by reports that Beijing is pushing companies to create a domestic alternative to Nvidia AI chips.

Alibaba's Hong Kong shares jumped nearly 19%, the largest one-day gain since early 2022. This was due to optimism about its cloud business. DeepSeek was also reported to have chosen Huawei chips for some of its AI model training.

This may have led to some profit-taking in Japanese chip company Advantest. The stock fell 9.1% and gave back some of its near-50% gains in the last three months. SoftBank Group, an AI-focused investor, also fell 6%. This contributed to the Nikkei's 2% decline.

Chinese investors may also find it encouraging that President Trump's tariff policies are facing legal challenges. The tariffs will remain in effect until the Supreme Court hears the case in October. This could cause trading partners to delay negotiations with the White House.

Few, if any, of the supposedly agreed trade "deals", have actually been signed or ratified. They are more like concepts for a framework deal. The talks with Japan are stuck over rice while the negotiations with South Korea have been stymied despite recent meetings of leaders.

The markets seem to assume that the conservative majority of the Supreme Court can find a solution for Trump to maintain the tariffs. If the judges upheld the ruling of the appeals court, many deals would have been canceled and Trump's ability to negotiate new deals would be greatly reduced.

Treasury will also be required to borrow the $100 billion that was collected. Since it will likely be spent, this money would have to come from somewhere else. It would be a logistical nightmare and the money would not go to American consumers, but rather the importers that paid the tariffs.

Would importers reduce any price increases to the pre-tariff level or would they keep them high to increase margins? What happens to the 3 trillion dollars or more that taxes were supposed bring in for tax cuts?

Who knew that trade law could be so entertaining?

Market developments on Monday that may have a significant impact

- European PMIs in August, EU unemployment figures for July

- Speech by ECB president Christine Lagarde. Piero Cipollone, Isabel Schnabel and other ECB Board Members will be making appearances.

(source: Reuters)