Japan's GDP shrank 1.8% in Q3, marking the first contraction in six quarters, driven by weakened domestic demand and slowing exports. The decline was less severe than expected, as economists had predicted a 2.5% drop.

The upcoming Autumn Budget presents significant challenges for UK Chancellor Rachel Reeves as she faces pressure to balance voter expectations, fiscal discipline, and market confidence. Reeves must address a multi-billion-pound deficit while adhering to fiscal rules demanding that spending be covered by tax revenue and public debt be reduced over time. Options on the table include unpopular tax hikes, spending cuts, or a combination of both.

Spain's budget deficit is on track to be lower than Germany's next year for the first time in nearly two decades, with Spain's deficit projected to fall to 2.3% of GDP and Germany's to rise to 3.1% in 2026, according to the Bank of Spain and the German Council of Economic Experts. Spain's economic growth is driven by immigration, tourism, and EU funds, while Germany faces infrastructure challenges and higher borrowing.

As tech companies prepare to raise substantial funds for artificial intelligence investments, banks and investors are increasingly using derivatives to hedge against potential defaults. This trend has notably increased the cost and trading volume of credit default swaps, particularly for companies like Oracle and Meta Platforms.

DBS CEO Tan Su Shan says the bank is already seeing significant returns from artificial intelligence investments, with a revenue increase of more than $1 billion Singapore dollars this year. "It's not hope. It's now. It's already happening. And it will get even better," Tan says. DBS, Southeast Asia's biggest bank, has implemented 370 AI use cases powered by more than 1,500 models, particularly in financial services for institutional clients.

Global money managers are sounding alarms over the risks associated with increasingly crowded trades in emerging markets. Concerns center on the potential for abrupt reversals in popular positions, such as those in the Brazilian real and AI-linked stocks, should market sentiment shift. Overcrowding could increase volatility and lead to quick unwinding, posing challenges for investors seeking stability in these regions.

Dutch central bank governor Olaf Sleijpen has warned that the rapid growth of US dollar-backed stablecoins could pose serious risks to financial stability in Europe. He noted that if these digital tokens are not truly stable, a sudden rush to redeem them could force the sale of large amounts of underlying assets, disrupting markets. Such instability could impact the economy and inflation, potentially requiring intervention from the European Central Bank.

Japan's Financial Services Agency is reportedly weighing new regulations that would categorize cryptocurrencies as financial products, making them subject to insider trading rules. The proposed changes aim to increase oversight and align digital assets with existing financial frameworks, with legislation expected to be considered in the next parliamentary session, sources say.

Yuan usage in cross-border payments continues to accelerate, with the People's Bank of China reporting a 14 percent year-on-year increase to 35 trillion yuan around $4.9 trillion, in the first half of the year. This surge reflects the growing adoption of the yuan for international financing and settlements as Chinese companies expand globally, highlighting its rising influence in global trade and investment.

A potential rare earths agreement between the US and China could be finalized by Thanksgiving, according to US Treasury Secretary Scott Bessent. "I am confident that post our meeting in Korea between the two leaders, President Trump, President Xi, that China will honour their agreements," Bessent said.

At the recent US-China Symposium on Building the Financial System of the 21st Century, SIFMA President and CEO Kenneth E. Bentsen, Jr. shared perspectives on the future of the US-China financial relationship. In this post, he highlights the scale of US-China capital flows and progress on market access; The growing nexus of national security and capital markets; and SIFMA's priorities: fair market access, strong investor protections, transparency, and pragmatic data rules.