Asia open: Fragile engines, faulty pistons

Markets hit the Asian open with the hum of an old machine running at two different speeds—on one side, the U.S. tech juggernaut roaring like a supercharged engine, on the other, the Chinese economy coughing like a car starved of fuel. Between them sits the Fed, staring at a dashboard that’s flashing more red lights than green.

The U.S.–China trade talks offered a spark of optimism Monday, with Trump promising a Friday call with Xi and a framework deal on TikTok ownership giving Washington the optics of control. Yet the subtext is unmistakable—AI and chips are the crown jewels here, and Beijing’s fresh antitrust probe into Nvidia was no coincidence. Both capitals are haggling not over tariffs but over who holds the keys to the next high-tech revolution.

In markets, that contest is translating into a tech melt-up that refuses to slow. Tesla ignited a speculative blaze after Musk dropped a billion of his own money into the stock, Alphabet slipped into the rarefied $3 trillion club, and the comms sector lit up another 2.3% despite Nvidia wobbling under China’s probe. The message from investors is blunt: as long as AI is the chosen horse, no warning signs on valuation or regulation will keep them from betting the farm. Tech remains on the casino floor, and the tables are packed.

Contrast that with China’s macro tape. August’s data dump was the economic equivalent of a limp handshake—industrial production soft, retail sales crawling, credit creation thin, and investment flows weaker than the pandemic years. The only surprise was the unemployment rate tilting lower, which says more about the difficulty of measuring joblessness than it does about momentum. Beijing will be pushed toward another fiscal round, but investors have seen this film before: every time the dragon stirs, it tends to stumble before building real pace. The recent bounce in Chinese equities and the yuan’s climb to year-to-date highs feel more like speculative front-running than conviction.

Meanwhile, the U.S. economy itself is hardly bulletproof. The labour market is shifting from tailwind to headwind—jobless claims and unemployment are at their highest since 2021, and for the first time in four years, there are more job seekers than jobs. That single ratio tells the Fed all it needs to know: rate cuts are back on the runway. Add the housing drag—mortgage payments nearly doubled from pre-COVID levels, affordability at record lows, rents soaring—and you get a feedback loop that eats into consumption, profits, hiring, and confidence. Call it a doom spiral where housing’s broken piston weakens the labour cylinder, and vice versa.

The cruelty is in the lock-in. Millions of U.S. homeowners are frozen into their pandemic-era mortgages, stuck with ultra-low rates that make selling or moving impossible. Just as the labour market needs more mobility and flexibility, it’s running into brick walls. The workforce is chained, at precisely the wrong moment.

Put it all together, and the trading picture is classic divergence: tech still partying like it’s the only room in town, China trying to patch leaks in its hull, and the U.S. consumer grinding under housing and labour drags. The Fed may soothe with cuts, but cuts into weakness rarely inspire lasting rallies—they’re more often an admission that growth is bleeding. Nuance is very improtant here for the post-Fed market antics.

At the Asia open, investors are left weighing two engines running out of sync—an AI boom that looks indestructible, and a macro backdrop cracking under its own weight. For traders, it’s less about whether the machine keeps moving and more about how long before the misfire rattles the chassis.