Alibaba's new AI chip compatible with Nvidia tools

EU mid-market update: Alibaba's new AI chip compatible with Nvidia tools may spark concerns about China catching up in the field; Fed's Waller does not see reason to cut 50bps next month yet ahead of Fed's Cook emergency hearing this morning.

Notes/observations

- Overall, equities opened mixed and muted but selling momentum built as session wore on. Focus is on upcoming US PCE data before US holiday on Monday.

- WSJ reports Alibaba has built a new AI inference chip that is compatible with Nvidia tools (NVDA's biggest moat) and now in testing, while its Qwen team hints at major September releases. In the bigger picture, China is pursuing a software-led, FP8-first strategy - standardizing numerics like DeepSeek’s UE8M0 and full-stack tooling across vendors such as Cambricon, ramping capacity via new plants and SMIC’s planned 7 nm doubling, improving packaging and HBM supply - which points to gradual China-only substitution away from Nvidia and AMD and tougher pricing for H20-class parts.

- US ended the de minimis exemption worldwide early Friday, so packages worth $800 or less now face tariffs; during a six-month transition, duties either mirror the origin country’s tariff level, roughly 10-50 percent, or apply a flat fee of $80, $160, or $200 per parcel depending on origin.

- Ahead of Fed's Cook emergency court hearing later this morning, Fed's Waller delivered a big speech. He said he supports a 25 bp cut in September, anticipates additional reductions over the next three to six months, and does not see a larger September move unless next week’s August jobs report shows substantial weakening and inflation remains well contained.

- UK banks underperforming after FT suggests Chancellor Reeves is considering a surcharge on bank profits or even a new bank levy as a possible way to help fill a fiscal hole estimated by economists to be >£20B, as part of Autumn budget announcements.

- On trade talks, EU offered to scrap tariffs on US industrial goods and widen access for seafood/agriculture; US extended China tariff exclusions to November.

- Regarding data, German retail sales missed forecast, but unemployment was healthier and regional CPI mostly in line before national reading at 08:00 ET, both Spanish and French flash CPI readings were lower than consensus.

- Asia closed mixed with Shanghai higher by +0.4%. EU indices -0.3% to -0.6%. US futures -0.3% to -0.5%. Gold -0.2%, DXY +0.1%; Commodity: Brent -0.5%, WTI -0.5%; Crypto: BTC -2.9%, ETH -5.6%.

Asia

- Japan Aug Tokyo CPI Y/Y: 2.6% v 2.6%e v 2.9% prior; CPI (ex-fresh food) Y/Y: 2.5% v 2.5%e.

- (JP) Japan July Preliminary Industrial Production M/M: -1.6% v -1.1%e prior; Y/Y: -0.9% v -0.6%e.

- Japan July Retail Sales M/M: +0.3% v -0.2%e Y/Y: -1.6% v +1.6%e.

- Japan July Jobless Rate: 2.3% v 2.5%e.

- South Korea July Industrial Production M/M: 0.3% v 0.2%e; Y/Y: 5.0% v 3.9%e.

- Australia July Private Sector Credit M/M: 0.7% v 0.6%e prior; Y/Y: 7.2% v 6.8% prior.

- RBA said to warn of financial stability risks from private market boom.

Europe

- UK Aug Lloyds Business Barometer: 54 v 52 prior.

Americas

- Fed's Waller commented that no set sequence on how fast to cut rates. Could back a large rate cut at the next meeting if August NFP were to signal a “substantial weakening”.

- Vice President Vance: Interest rates are too high, Fed is not doing its job.

Trade

- US to start putting tariffs on small packages from around the world, regardless of their value; closes De Minimis loophole.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.62% at 550.22, FTSE -0.40% at 9,180.30, DAX -0.56% at 23,908.99, CAC-40 -0.64% at 7,713.28, IBEX-35 -1.02% at 14,924.92, FTSE MIB -0.52% at 42,202.00, SMI -0.42% at 12,161.16, S&P 500 Futures -0.39%].

Market focal points/key themes: European indices opened lower across the board and remained under pressure through the early part of the session; geopolitics seen weighing on risk sentiment; among sectors managing to stay in the green are energy and industrials; sectors leading to the downside include financials and technology; Rockhopper divests Italian assets; focus on German CPI and US PCE coming out later in the day; no major US earnings expected.

- Consumer discretionary: Remy Cointreau [RCO.FR] -1.5% (raises Op outlook).

- Financials: Barclays [BARC.UK] -3.5%, NatWest [NWG.UK] -4.5% (FT reports that fears are growing in the City of London that Chancellor Reeves will target banks to help shore up the UK’s public finances).

- Industrials: Rheinmetall [RHM.DE] +3.5% (Germany Chancellor Merz: Seems clear that there will be no meeting between Russia Pres Putin and Ukraine Pres Zelenskiy), Continental [CON.DE] -1.0% (Caterpillar cut profit outlook).

- Technology: ASML [ASML.NL] -1.0% (Alibaba’s AI chip; TSMC plans major supply chain overhaul; Dell and Marvell results).

Speakers

- Turkey Foreign Min Fidan noted that Russia had agreed to confirm borders of two occupied Ukrainian regions (Kherson and Zaporizhzhia) along the front line; Currently, there was a preliminary agreement on the transfer of the remaining 25-30% of Donetsk region to Russia.

- New Zealand Fin Min noted that RBNZ Chair Quigley has resigned, effective immediately.

Currencies/fixed income

- USD remained locked in tight ranges despite a plethora of EU growth and inflation data. Greenback remained firmly entrenched in recent consolidation levels.

- EUR/USD stayed under the 1.17 level as various EU inflation data stayed around ECB target level. Markets expect the central bank to continue its pause phase of its easing cycle at its Sept meeting.

- GBP/USD staying below the 1.35 level. Pair facing headwinds as UK Chancellor Reeves could target to help shore up the UK’s public finances either by putting a surcharge on the sector’s profits or even a new bank levy.

- USD/JPY steady once again around the 1.47 area.

- 10-year German Bund yield at 2.70% and 10-year Gilt yield at 4.72% 10-year Treasury yield: 4.23%.

Economic data

- (FI) Finland July GDP Indicator Y/Y: 0.0% v 0.0% prior.

- (FI) Finland Q2 GDP Q/Q: -0.4% v 0.0% prior; Y/Y: 0.0% v 1.0% prior.

- (FI) Finland July Retail Sales Volume Y/Y: +0.1% v -1.2% prior.

- (DE) Germany July Retail Sales M/M: -1.5% v 0.0%e; Y/Y: 1.9% v 2.5%e.

- (DE) Germany July Import Price Index M/M: -0.4% v -0.3%e; Y/Y: -1.4% v -1.2%e.

- (SE) Sweden Q2 GDP Q/Q: 0.5% v 0.4%e; Y/Y: 1.4% v 1.4%e.

- (SE) Sweden July Retail Sales M/M: 0.3% v 2.5% prior; Y/Y: 2.9% v 2.0% prior.

- (SE) Sweden July Non-Manual Workers’ Wages Y/Y: % v 2.8% prior.

- (NO) Norway July Retail Sales M/M: 0.6% v 0.1% prior.

- (NO) Norway Aug Unemployment Rate: 2.2% v 2.2%e.

- (DK) Denmark July Unemployment Rate: 2.6% v 2.5% prior; Gross Unemployment Rate: % v 2.9% prior.

- (ZA) South Africa July M3 Money Supply Y/Y: 6.8% v 7.3% prior; Private Sector Credit Y/Y: 5.8% v 5.5%e.

- (HU) Hungary July Trade Balance: €1.0B v €1.0B prior.

- (FR) France Aug Preliminary CPI M/M: 0.4% v 0.5%e; Y/Y: 0.9% v 1.0%e.

- (FR) France Aug Preliminary CPI EU Harmonized M/M: 0.5% v 0.5%e; Y/Y: 0.8% v 0.9%e.

- (FR) France Q2 Final GDP Q/Q: 0.3% v 0.3% prelim; Y/Y: 0.7% v 0.7% prelim.

- (FR) France Q2 Final Private Sector Payrolls Q/Q: 0.2% v 0.0% prelim; Total Payrolls: %% v v -0.1% prior.

- (FR) France July Consumer Spending M/M:-0.3% v -0.3%e; Y/Y: -0.1% v +0.1%e.

- (FR) France July PPI M/M: +0.4% v -0.1% prior; Y/Y: 0.4% v 0.3% prior.

- (ES) Spain Aug Preliminary CPI M/M: 0.0% v 0.1%e; Y/Y: 2.7% v 2.8%e.

- 03:00 (ES) Spain Aug Preliminary CPI EU Harmonized M/M: 0.0% v 0.1%e; Y/Y: 2.7% v 2.8%e; CPI Core Y/Y: 2.4% v 2.3%e.

- (ES) Spain July Adjusted Retail Sales Y/Y: 4.7% v 6.2% prior; Retail Sales (unadj) Y/Y: 4.3% v 6.3% prior.

- (AT) Austria July PPI M/M: +0.2% v -0.2% prior; Y/Y: -0.8% v -0.9% prior.

- (CZ) Czech Q2 Preliminary GDP (2nd reading) Q/Q: 0.5% v 0.2% advance; Y/Y: 2.6% v 2.4% advance.

- (TR) Turkey July Unemployment Rate: 8.0% v 8.4% prior.

- (TH) Thailand July Current Account Balance: $2.2B v $1.0Be; Overall Balance of Payments (BOP): $3.5B v $1.1B prior; Trade Account Balance: $2.5B v $3.3B prior; Exports Y/Y: 9.7% v 16.1% prior; Imports Y/Y: 4.5% v 13.8% prior.

- (CN) Weekly Shanghai Copper Inventories (SHFE): 79.7K v 81.7K tons prior.

- (TH) Thailand May Foreign Reserves w/e Aug 22nd: $267.1B v $266.6B prior.

- (DE) Germany Aug Unemployment Change: -2.0K v +10.0Ke; Claims Rate: 6.3% v 6.3%e.

- (EU) ECB July Consumer Expectation Survey: 1-year ahead CPI Expectations: 2.6% v 2.5%e; 3-year ahead CPI expectations: 2.5% v 2.4%e.

- (DE) Germany Aug CPI North Rhine Westphalia M/M: % v 0.2% prior; Y/Y: 2.0% v 1.8% prior.

- (DE) Germany Aug CPI Hesse M/M: 0.0% v 0.3% prior; Y/Y: 2.4% v 2.4% prior.

- (DE) Germany Aug CPI Bavaria M/M: 0.1% v 0.3% prior; Y/Y: 2.1% v 1.9% prior.

- (DE) Germany Aug CPI Brandenburg M/M: 0.0% v 0.3% prior; Y/Y: 2.5% v 2.2% prior.

- (DE) Germany Aug CPI Saxony M/M: 0.0% v 0.2% prior; Y/Y: 2.2% v 2.1% prior.

- (DE) Germany Aug CPI Baden Wuerttemberg M/M: -0.1% v +0.4% prior; Y/Y: 2.5% v 2.3% prior.

- (IT) Italy Q2 Final GDP Q/Q: -0.1% v -0.1% prelim; Y/Y: 0.4% v 0.4% prelim.

- (ES) Spain Jun Current Account Balance: €5.0B v €6.4B prior.

- (RU) Russia Narrow Money Supply w/e Aug 22nd (RUB): 18.73T v 18.74T prior.

- (PL) Poland Aug Preliminary CPI M/M: -0.1% v 0.0%e; Y/Y: 2.8% v 2.9%e.

- (CZ) Czech July M2 Money Supply Y/Y: 3.0% v 2.9% prior.

- (NO) Norway Central Bank (Norges) Sept Net FX Transactions (NOK): -276M v -276M prior.

- (HK) Hong Kong July M3 Money Supply Y/Y: 6.2% v 8.4% prior; M2 Money Supply Y/Y: 6.2% v 8.4% prior; M1 Money Supply Y/Y: 18.7% v 23.7% prior.

- (IT) Italy Aug Preliminary CPI M/M: 0.1% v 0.2%e; Y/Y: 1.6% v 1.7%e.

- (IT) Italy Aug Preliminary CPI EU Harmonized M/M: -0.2% v 0.0%e; Y/Y: 1.7% v 1.8%e.

- (BE) Belgium Q2 Final GDP Q/Q: 0.2% v 0.2% prelim; Y/Y: 1.0% v 1.0 prelim.

- (GR) Greece July Retail Sales Value Y/Y: +1.8% v -5.8% prior; Retail Sales Volume Y/Y: +3.0% v -4.6% prior.

- (IS) Iceland Q2 GDP Q/Q: -0.7% v +2.7% prior; Y/Y: -1.9% v +2.7% prior.

- (IS) Iceland July Final Trade Balance (ISK): -44.0B v -44.2B prelim.

Fixed income issuance

- (DK) Denmark sold total DKK280M in 3-month and 6-month Bills.

- (IN) India sold total INR320B vs. INR320B indicated in 2040 and 2065 bonds.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 06:00 (PT) Portugal Q2 Final GDP Q/Q: 0.6%e v 0.6% prelim; Y/Y: 1.9%e v 1.9% prelim.

- 06:00 (PT) Portugal Aug Preliminary CPI M/M: No est v -0.4% prior; Y/Y: No est v 2.6% prior.

- 06:00 (PT) Portugal Aug Preliminary CPI EU Harmonized M/M: No est v -0.3% prior; Y/Y: No est v 2.5% prior.

- 06:00 (UK) DMO to sell £6.0B in 1-month, 3-month and 6-month bills (£1.0B, £2.0B and £3.0B respectively).

- 06:30 (IN) India Q2 GDP Y/Y: 6.7%e v 7.4% prior; GVA Y/Y: 6.4%e v 6.8% prior.

- 06:30 (IN) India July YTD Fiscal Deficit (INR): No est v 2.807T prior.

- 07:30 (BR) Brazil July Nominal (overall) Budget Balance (BRL): -132.1Be v -108.1B prior; Primary Budget Balance: -60.6Be v -47.1B prior; Net Debt to GDP: 63.4%e v 62.9% prior.

- 07:30 (IN) India Forex Reserve w/e Aug 22nd: No est v $695.1B prior.

- 08:00 (DE) Germany Aug CPI M/M: 0.0%e v 0.3% prior; Y/Y: 2.1%e v 2.0% prior.

- 08:00 (DE) Germany Aug CPI EU Harmonized M/M: 0.0%e v 0.4% prior; Y/Y: 2.0%e v 1.8% prior.

- 08:00 (ZA) South Africa July Trade Balance (ZAR): 19.7Be v 22.0B prior.

- 08:00 (ZA) South Africa July Monthly Budget Balance (ZAR): No est v 48.7B prior.

- 08:00 (BR) Brazil July National Unemployment Rate: 5.7%e v 5.8% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (ES) Spain Debt Agency (Tesoro) announcement on upcoming issuance (if any).

- 08:00 (IN) India announces upcoming bill issuance (held on Wed).

- 08:30 (US) July Advance Goods Trade Balance: -$90.2Be v -$84.9B prior (revised from -$86.0B); Imports M/M: No est v -4.2% prior; Exports M/M: No est v -0.6% prior.

- 08:30 (US) July Personal Income: 0.4%e v 0.3% prior; Personal Spending: 0.5%e v 0.3% prior; Real Personal Spending (PCE): 0.3%e v 0.1% prior.

- 08:30 (US) July PCE Price Index M/M: 0.2%e v 0.3% prior; Y/Y: 2.6%e v 2.6% prior.

- 08:30 (US) July Core PCE Price Index M/M: 0.3%e v 0.3% prior; Y/Y: 2.9%e v 2.8% prior.

- 08:30 (US) July Preliminary Wholesale Inventories M/M: 0.2%e v 0.1% prior; Retail Inventories M/M: 0.2%e v 0.3% prior.

- 08:30 (CA) Canada Jun GDP M/M: +0.1%e v -0.1% prior; Y/Y: 1.3%e v 1.2% prior; Q2 Quarterly GDP Annualized: -0.7%e v +2.2% prior.

- 09:00 (CL) Chile July Unemployment Rate: 9.1%e v 8.9% prior.

- 09:00 (CL) Chile July Retail Sales Y/Y: 5.5%e v 5.9% prior; Commercial Activity Y/Y: No est v 7.3% prior.

- 09:00 (CL) Chile July Industrial Production Y/Y: 2.8%e v 3.2% prior; Manufacturing Production Y/Y: 3.0%e v 12.0% prior; Total Copper Production: No est v 424.4K .

- 09:45 (US) Aug Chicago Purchase Managers Index (PMI): 46.0e v 47.1 prior.

- 10:00 (US) Aug Final University of Michigan Confidence: 58.6e v 58.6 prelim.

- 11:00 (US) Aug Kansas City Fed Services Activity: No est v -5 prior.

- 11:00 (CO) Colombia July National Unemployment Rate: No est v 8.6% prior; Urban Unemployment Rate: 8.4%e v 8.3% p.

- 11:00 (MX) Mexico July Net Outstanding Loans (MXN): No est v 6.998T prior.

- 12:00 (EU) Potential sovereign ratings after European close (S&P on Portugal).

- 13:00 (US) Weekly Baker Hughes Rig Count data.

- (MX) Mexico July Public Balance (MXN): No est v -465.5B prior.

Weekend

21:30 (CN) China Aug PMI Manufacturing (Govt Official): 49.5e v 49.3 prior; Non-Manufacturing PMI: 50.2e v 50.1 prior; Composite PMI: No est v 50.2 prior.