European and Global Markets Outlook: AI Hype in China, Tariff Uncertainty in U.S.
Global markets started September on a cautious note. Much of Asia traded lower, while Wall Street remained closed for a holiday, leaving S&P 500 futures flat in what is often a weak month for equities. European share futures also showed little movement. By contrast, China’s markets continue to benefit from strong liquidity flows in a low-yield environment.
Chinese blue-chip stocks rose more than 10% in August, supported by speculation that Beijing is encouraging firms to develop domestic AI chips as an alternative to Nvidia. Hong Kong-listed Alibaba shares surged nearly 19%, their biggest one-day gain since early 2022, fueled by optimism around its cloud business. Reports also indicated that DeepSeek selected Huawei chips for some of its AI training models.
This wave of optimism hit Japanese chipmakers, with Advantest plunging 9.1% after a three-month rally of nearly 50%. AI-focused investor SoftBank Group also dropped 6%, weighing on the Nikkei, which lost 2%.
Meanwhile, Chinese investors are watching closely as President Donald Trump’s tariff policies face legal challenges. Although tariffs remain in place pending a likely appeal to the U.S. Supreme Court in October, the ruling could alter trade negotiations. Many of the so-called “agreements” have yet to be formalized, with talks stalling with Japan over rice imports and with South Korea despite recent leadership meetings.
Markets generally expect the Supreme Court’s conservative majority to uphold the tariffs. However, if the appeals court ruling is confirmed, existing trade deals could collapse, diminishing Trump’s leverage for new negotiations. The U.S. Treasury would also face the challenge of returning over $100 billion in collected tariffs, money already spent and likely requiring additional borrowing.
The big question remains: would importers cut consumer prices if tariffs were removed, or keep them elevated to protect margins? And what about the $3 trillion in tax revenue once expected to offset tax cuts?
Key developments for Monday include:
- Eurozone PMIs for August
- EU unemployment data for July
- A speech by ECB President Christine Lagarde, alongside appearances from board members Piero Cipollone and Isabel Schnabel
