News of the week summary - 21/09/2025
Global markets surge amid AI mania
Stock markets across the globe have reached new highs this week, fueled by a combination of optimism around artificial intelligence, looser monetary policy, and investors’ fear of missing out. In the United States, the S&P 500, Nasdaq, and Russell 2000 (three indexes that track a large amount of securities listed in the US) all hit record levels after the Federal Reserve cut interest rates on Wednesday. Lower rates make borrowing cheaper, which tends to encourage both corporate investment and investor appetite for riskier assets such as equities.
The rally is not limited to American markets. The MSCI All Country World Index, which tracks developed and emerging economies, also set an all-time high. Emerging market equities, which had long been avoided by global investors, are now outperforming the global average, evidence that risk-taking is extending far beyond tech giants like Nvidia and Alphabet, whose valuations have already soared into the trillions.
One striking development is the collapse in corporate borrowing costs. High-grade U.S. companies are now paying less than 0.8 percentage points above U.S. Treasury yields, their narrowest spread since 1998. In some cases in Europe, large French companies can borrow at cheaper rates than their own government, an inversion that signals extraordinary investor confidence in corporate credit. In finance, the “spread” refers to the extra return that investors demand to hold a risky bond compared to a safe one (such as government debt). When spreads shrink, it shows that investors are downplaying risks.
This exuberance is widely attributed to investors chasing returns in riskier corners of the market under the belief that the AI boom and broader rally will continue. Comparisons are increasingly being drawn to the late-1990s dotcom bubble, when enthusiasm for internet companies drove valuations far beyond their fundamentals before ending in a dramatic crash.
At the same time, analysts warn of a paradox: financial markets appear “priced for perfection” while economic and geopolitical risks remain elevated.
Across the Pacific, Chinese tech stocks have mirrored this momentum, posting impressive gains despite a more subdued domestic economy. The Hang Seng Tech Index, tracking 30 major Hong Kong–listed companies, has climbed 41% so far in 2025, outperforming the Nasdaq’s 17% increase over the same period. Leading firms such as Alibaba, Tencent, and Baidu have seen share prices rise sharply, driven by progress in artificial intelligence and Beijing’s push for domestic semiconductor development. Breakthroughs like DeepSeek’s AI innovations earlier this year have been pivotal in shifting investor sentiment, reinforcing confidence in China’s tech sector after years of regulatory scrutiny.
While enthusiasm for tech is high in both markets, analysts emphasize that the US and China rallies reflect different dynamics. In the US, the gains are broad-based across all sectors of tech and reinforced by supportive monetary conditions, whereas in China the optimism is concentrated in companies demonstrating technological progress, particularly in AI and semiconductor design. The trend underscores the intensifying global competition in technology innovation, with investors closely watching developments on both sides of the Pacific.
Despite strong gains, some caution remains. In China, limited transparency around chip advancements and ongoing regulatory uncertainties suggest that the rally carries speculative elements.
Oil prices hold steady despite warnings of oversupply
Oil markets have remained relatively stable this year, defying forecasts of a major supply glut. Brent crude, the international benchmark, is trading around $67 a barrel, unchanged since June, even though agencies including the International Energy Agency (IEA) and the US Energy Information Administration predict surpluses of 2–3 million barrels per day in the coming year. By comparison, a similar imbalance in 2020 contributed to a historic crash in oil prices.
A key factor supporting prices is China’s strategic stockpiling of crude. Beijing has quietly been building reserves, at times adding nearly 1 million barrels per day earlier this year. Analysts suggest the stockpiling may serve as insurance against potential disruptions in Russian or Iranian supply, or as part of a broader strategy to protect the economy amid trade or currency tensions with the US.
Other factors bolstering oil prices include sanctions on producers such as Russia and Venezuela, and the lasting impact of Opec+ supply cuts. These constraints have reduced availability of certain crude grades, forcing refiners to pay more for alternatives, which indirectly supports Brent. The market is also in backwardation, where contracts for immediate delivery are more expensive than those for future delivery, a pattern generally associated with tight supply rather than oversupply.
Despite these supportive factors, the IEA expects global oil demand growth to slow sharply in 2025, to its weakest pace outside the pandemic years since 2009. If production from Opec+ and other producers increases as projected, a surplus could still emerge. However, some analysts believe that practical limits on output will restrain the glut, keeping prices relatively stable for now.
Markets may only adjust sharply if excess oil appears in highly visible storage hubs such as Cushing in the US or Rotterdam in Europe. Until then, China’s stockpiling and Opec+ constraints appear to be cushioning prices against the steep declines predicted by some forecasts.
Federal Reserve cuts rates and signals further moves ahead
The Federal Reserve lowered interest rates by 0.25 percentage points yesterday, bringing the federal funds target range to 4.00-4.25 per cent. This marks the first reduction of 2025 and comes amid signs of a cooling US labor market.
Chair Jerome Powell noted that hiring has slowed in recent months even though unemployment remains low, reducing concerns about persistent inflation. Projections released alongside the decision show that most Fed policymakers anticipate at least two further cuts before the end of the year. Yields on 10-year US Treasuries, which reflect expectations for growth and inflation, fell slightly to 3.999 per cent following the announcement.
The decision was not unanimous: newly appointed board member Stephen Miran advocated for a larger half-point reduction. Debate within the Fed reflects broader uncertainty about how quickly borrowing costs should adjust given mixed economic signals. Inflation has ticked up slightly in recent months (consumer prices rose 2.9 per cent in the year to August, compared with 2.7 per cent in July), but still the Fed expects slowing job creation to help keep wage growth and inflation pressures in check.
Recent labor market data has reinforced expectations of further easing: only 22,000 jobs were added in August, raising concerns that hiring momentum in the world’s largest economy is stalling. Weakening consumer sentiment about job prospects has added to pressure for the Fed to act in support of growth.
U.S. introduces $100,000 fee for H-1B Visa applications
The White House has introduced a new $100,000 application fee for the H-1B visa program, a key channel through which U.S. companies hire highly skilled foreign workers. President Donald Trump signed the proclamation on Friday, prompting companies to issue immediate guidance to employees as they sought clarity on how the measure would be applied.
The H-1B visa allows U.S. employers to temporarily hire workers in specialized fields such as technology, engineering, healthcare, and finance. Silicon Valley has traditionally been one of the heaviest users of the program: Amazon and Microsoft, for example, secured more than 15,000 approvals in the last fiscal year. About 400,000 applications were approved overall last year, most of them renewals.
Initially, some companies advised H-1B holders not to travel outside the U.S. until the scope of the new policy was confirmed. On Saturday, the White House clarified that the fee would apply only to new applicants starting in the next cycle, not to existing visa holders or those renewing their visas.
Reactions to the policy varied globally. Some U.S. business leaders noted potential adjustments for start-ups and research institutions that rely on foreign expertise, while business groups in Canada and Europe pointed to opportunities to attract more international talent. India, whose nationals account for a large share of H-1B recipients, highlighted that the change may affect families and emphasized the role of cross-border talent flows in fostering innovation and economic growth.
According to the administration, the measure is designed to provide certainty for employers while encouraging the hiring of American workers. For now, companies and governments alike are watching closely as the new fee structure takes effect and reshapes decisions about where non-American skilled professionals choose to work.
Argentina’s central bank intervenes to support the Peso amid political uncertainty
Argentina’s central bank stepped into currency markets this week to stabilize the peso, marking its first direct intervention since President Javier Milei introduced a managed float of the exchange rate in April. The bank sold $53mn in reserves after the peso weakened to the lower limit of its official trading band (around 1,475 pesos per dollar) under rules tied to the country’s $20bn loan program with the IMF.
The intervention comes against the backdrop of mounting political and economic strains. Official data showed the economy contracted 0.1 per cent in the second quarter, halting a fragile recovery. At the same time, Milei’s government is grappling with political turbulence following a heavy electoral defeat in Buenos Aires province and a corruption scandal involving his chief of staff. Investor confidence has wavered, pushing the peso down 12 per cent over the past month and increasing pressure on Argentina’s already fragile financial system.
Authorities have also raised interest rates and tightened banks’ reserve requirements in an effort to stabilize the currency, but these measures have had only limited impact while weighing on economic activity. With midterm elections looming in October, analysts warn that the government has few effective tools left to defend the peso without draining its scarce foreign currency reserves. Using those reserves risks undermining Milei’s broader strategy of regaining access to global financial markets and reducing reliance on IMF support.
Investor unease is already evident in Argentina’s bond markets: the spread between the country’s dollar-denominated debt and US Treasuries has widened sharply to 11.7 percentage points, signaling rising fears over the government’s ability to meet upcoming debt repayments. Meanwhile, Milei’s austerity and reform agenda faces resistance in Congress. Legislators recently overrode his veto of higher funding for hospitals and universities, extending a series of defeats that complicate his efforts to stabilize the economy through fiscal tightening.