The "untold" Story of China...
- Marc Bentin
- Sep 7, 2025
- 8 min read
BentinPartner Weekly
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Please find below our latest Weekly Trend Report.
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Marc Bentin,
Bentinpartner GmbH
UStocks marked paused, ending the week little changed after a very disappointing US non-farm payrolls report on Friday (only 22’000 jobs were created, worse than the 75k expected) which was first celebrated as good news (in the sense of raising the outlook for a higher 50bps cut this month), then sold into….as more of a “recessionary” signal, especially when combined with the June revision lower.
Other economic data last week included US construction spending falling in July as high mortgage rates continued to constrain the housing market (Construction spending slipped 0.1% after an unrevised 0.4% drop in June).
Bond markets remained in focus all week with tensions in France, the UK, Japan and the US remaining palpable, but ending on Friday with a big rally in Treasuries following the publication of a much worse than expected US Non-Farm Payrolls report for August which followed an equally bad report in July that led President Trump to fire the messenger, the head of BLS, in charge of computing the payrolls number.
A key consideration last week were tensions in the French bond market where yields in the long end underperformed at the same time as the OAT/Bund widened on political concerns as the country faces a confidence vote (to be held today) that is likely to be defeated, leading to the resignation of French Prime Minister F. Bayrou.
“The bond vigilantes are circling over several targets right now: France, the UK, and Japan. But France is the most vulnerable,” said Dhaval Joshi, chief strategist at BCA Research. “France needs a political solution, but French politics are in gridlock. Ultimately, therefore, it may take the bond vigilantes to force France’s destiny.”
Interestingly, US credit spreads remained mostly unchanged on the week. The fact that credit spreads remain at or near historically low levels may also have to be seen as an early sign of defiance towards sovereign credits that may not reflect in the eyes of a growing number of investors, the degree 0 of credit risk…
The dollar closed the week mostly unchanged while most precious metals closed at record highs, driven by lingering political uncertainties, rising stagflationary risks and further central bank diversification (China released data overnight showing it had increased gold holdings for the 10th consecutive month).
Political pressure on the Fed persisted. “Former Federal Reserve Vice Chair Lael Brainard suggested there’s a real risk of multiple Fed district bank presidents getting removed from office next year as a result of politically charged maneuvering by President Donald Trump… Successfully taking out Cook would give Trump the chance of gaining a majority of his picks on the seven-member Board of Governors, she cautioned. Trump on his part said “We’ll have a majority very shortly. So that’ll be great. Once we have a majority, housing is going to swing, and it’s going to be great. People are paying too high an interest rate. That’s the only problem with us. We have to get the rates down a little bit.”
So far, the market response to the political pressure exerted on the Fed has been muted but it remains a key risk to the outlook for the dollar and the bond market. Hedge fund billionaire Ray Dalio warned last week that Donald Trump’s America is drifting into 1930s-style autocratic politics — and said other investors are too scared of the president to speak up. The Bridgewater Associates founder told the Financial Times that ‘gaps in wealth’, ‘gaps in values’ and a collapse in trust were driving ‘more extreme’ policies in the US. ‘I think that what is happening now politically and socially is analogous to what happened around the world in the 1930-40 period,’ Dalio said.
While US stocks closed the week muted, this was also the case for Chinese stocks last week after enjoying a powerful rally. One of the most untold stories since the beginning of the year is the outperformance of Chinese equities and in particular of Chinese tech stocks.
The only comments last week were those echoing China’s intention to keep Chinese equity markets gains contained (as they warned against rising margin debt).
In contrast, in the US, the wealth effect from rising (and bubbling) equity markets is perceived as a key recipe to keep the debt crisis at bay, Chinese authorities, even after inviting to caution, have now fully understood that they need to pursue policies that are also supporting equity markets, likely meaning that such comments will be best interpreted as an opportunity to buy the dip.
Even J. Ma has returned in Chinese officials’ good graces. He is still considered extremely influential as an entrepreneur, philanthropist and visionary. Alibaba, the company he founded and led until 2019 has conducted a decisive pivot toward streamlined efficiency and sharpened its strategic focus. Instead of the previous six sprawling business units, the company now is divided into four primary groups (including the high growth Cloud/AI infrastructure group that is now developing powerful chips competing with those from Nvidia), each with a distinct mission and market orientation which contribute to making the company a likely good pick, in our view, to ride a continuation of the Chinese market rally (besides occasional ups and down and relentless Western financial media bashing).
Geopolitically, besides a lack of progress towards peace in Ukraine (the US/EU are preparing a new set of sanctions as Russia continued to progress military in Ukraine and categorically refused the perspective of Europe moving troops in Ukraine after a putative and now highly unlikely peace/truce agreement).
This week, and today in particular, investors will focus on the risk from France’s confidence vote. This is the most telegraphed failed confidence vote in a long time and the initial market impact might be fairly limited, especially as the ECB will be monitoring the thermometer (the spread between Germany and France debt premium) with a sharp focus on avoiding any meaningful blow out.
Still, the political situation in France reduces the chance that rating agencies will refrain for much longer to downgrade the French sovereign credit from AA to A (two of the three major rating agencies need to decide such a downgrade before it will have a meaningful impact on international ownership of French OAT’s). Should this ultimately happen, the pursue of the ECB “policy transmission” safeguard will likely lead the ECB into an even more forceful action, in our view.
The ECB is meeting on Thursday and, at this stage, is expected to leave rates unchanged. President C. Lagarde’s remarks on Thursday will be analysed for clues on her willingness to help contain turmoil emanating from the country she once served as finance minister, Bloomberg reported.
Over the past week, the S&P500 dropped -0,3% (10,4% YTD) while the Nasdaq100 dropped -0,2% (12,7% YTD). The US small cap index gained 0,7% (7,6% YTD). AAPL rallied 3,1% (-4,3%, Z-score 2,1).
The Equally Weighed SP500 dropped -0,2% (7,5% YTD), outperforming the S&P500 by 0,1%. The median SP500 YTD return closed the week at 7,6%.
Cboe Volatility Index rallied 5,2% (-12,5% YTD) to 15,18.
The Eurostoxx50 dropped -0,6% (11,0%), underperforming the S&P500 by-0,4%.
Diversified EM equities (VWO) gained 0,6% (18,0%), outperforming the S&P500 by 0,8%.
The Dollar DXY Index (UUP) measuring the USD performance vs. other G7 currencies was unchanged (-6,9%) while the MSCI EM currency index (measuring the performance of EM currencies vs. the USD) gained 0,1% (6,3%).
10Y US Treasuries rallied -13bps (-47bps, Z-score -2,2) to 4,10%. 10Y Bunds dropped -6bps (30bps, Z-score -2,1) to 2,66%. 10Y Italian BTPs rallied -8bps (-2bps) to 3,50%, outperforming Bunds by -2bps.
10Y French OAT's rallied -6bps (25bps) to 3,45%, matching Bunds.
US High Yield (HY) Average Spread over Treasuries was unchanged (-15bps) to 2,72%. US Investment Grade Average OAS dropped -3bps (-4bps) to 0,83%.
In European credit markets, EUR 5Y Senior Financial Spread dropped -2bps (-6bps) to 0,58%.
Gold rallied 3,3% (36,8%) while Silver gained 0,5% (41,5%). Major Gold Mines (GDX) rallied 8,2% (95,6%, Z-score 2,0).
Goldman Sachs Commodity Index dropped -0,7% (3,0%). WTI Crude sold off by -2,4% (-12,9%).
Overnight in Asia…
S&P future +8 points; Hong Kong +0.4%; Nikkei+1.3%; China unch.
Futures are modestly higher with Asia posting gains as well.
China’s export growth slowed to the weakest in six months as shipments to the US plunged at a faster rate. Sales abroad rose 4.4% in August from a year earlier to $322bn. That was weaker than the median forecast for 5.5% growth. Imports climbed 1.3%, leaving a trade surplus of $102bn.
Japanese long-dated government debt which are facing renewed pressure from stagflation concerns are facing renewed pressure following the surprise resignation of Prime Minister Shigeru Ishiba on Sunday with markets concerned that the next LDP leader will lean more towards fiscal expansion. The yen also dropped and Japanese stocks rose on the news.
OPEC led by Saudi Arabia decided to re-start start a layer of halted oil production more than a year early, rather than pausing, as was expected, possibly signaling an intention to reclaim market share from US shale drillers. At the same time, the motivation could also be political as Saudi Crown Prince Mohammed bin Salman will visit Washington in November to meet President D. Trump, who has repeatedly called for lower fuel prices while he seeks to tame inflation and reduce interest rates.
Seeking to fend off the rise of Nigel Farage’s Reform UK Party, UK prime minister Starmer completed over the week end a wide-ranging government reshuffle.
China is moving to resume its domestic bond market with top Russian energy companies, signaling closer economic and diplomatic ties with Moscow, the FT reported. Xi welcomed Putin last week by calling him an “old friend” and added that China-Russia relations have “withstood the test of changing international circumstances.”
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