by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with news that Japan’s ruling party has struck a coalition deal that will allow conservative and investor favorite Sanae Takaichi to become the new prime minister. We next review several other international and US developments with the potential to affect the financial markets today, including a slowdown in Chinese economic growth and news of a major internet outage at Amazon Web Services that we suspect could be Chinese retaliation for US cyberattacks.

Japan: Reports yesterday said the ruling Liberal Democratic Party and upstart right-wing party Nippon Ishin no Kai (Japan Innovation Party) have broadly agreed to form a coalition government, setting the stage for Sanae Takaichi, the conservative leader of the LDP, to be voted in as Japan’s new prime minister tomorrow. Ishin will reportedly support Takaichi for prime minister but won’t have any cabinet positions in her government, Nevertheless, Takaichi’s stimulative economic proposals, which have made her an investor favorite, may have to be watered down to keep Ishin’s support.

China-United States: Amazon Web Services (AWS) early today suffered a major technology issue that disrupted internet services to thousands of major US companies, including Facebook, Venmo, and United Airlines. AWS hasn’t tied the outage to a cyberattack, but we note that the outage came just days after Beijing accused the US of launching cyberattacks against its National Time Service Center. According to AWS, the disruptions occurred in its data centers in northern Virginia, near Washington, suggesting China may have launched the attack to send a message.

• China’s National Time Service Center is affiliated with the Chinese Academy of Sciences and is responsible for generating and distributing China’s standard time.
• The NTSC also provides highly precise timing services for the country’s communications, finance, power, transport, mapping and defense sectors. Therefore, if the US really did attack the NTSC, it would represent a major threat to many of China’s key national systems and industries.
• By launching a retaliatory attack against AWS in northern Virginia, which is not only on the doorstep of Washington, DC, but also home to the Central Intelligence Agency, China could be sending a strong message that it will strike back against any US cyberattacks. Of course, this would add to the current US-China tensions over trade and could even more the current trade talks between the two countries harder.

China-Netherlands: After the Dutch government recently seized control of China-owned semiconductor firm Nexperia in response to US sanctions on the company, as we detailed in our Comment last week, reports over the weekend said Nexperia’s China unit told its workers to ignore directives from the company’s Netherlands-based managers. The move suggests China will fight back against the Dutch seizure. It also suggests that the US’s new, broader sanctions against China could mean that other firms in third-party countries could be caught in the crossfire.

Chinese Economy: According to newly released official data, Chinese gross domestic product in the third quarter was up just 4.8% from the same period one year earlier, slowing from the 5.2% increase in the year to the second quarter. The report suggested that the slowdown stemmed mostly from weaker consumer spending and slower investment, despite government stimulus programs. All the same, the average growth rate over the first three quarters of 2025 stood at 5.2%, staying on track to meet the government’s target of about 5.0% for the year.

Chinese Digital Currencies: The People’s Bank of China and the Cyberspace Administration of China have reportedly told several Chinese technology companies not to move forward with their plans to issue stablecoins under a new Hong Kong program. The affected firms include Alibaba-backed Ant Group and ecommerce group JD.com.

• The regulators evidently believe the tech firms are moving too fast to develop what would essentially be their own currencies, which would compete with the PBOC’s plan to issue its own digital currency.
• The move suggests stablecoins will face higher barriers in China than they are likely to face in the US. In turn, that highlights how the world is increasingly bifurcating between US and Chinese developments.

France: Wealth managers, bankers, and lawyers told the Financial Times that wealthy French citizens concerned about the fractured politics in their country have been shifting large amounts of their investments to Luxembourg annuities and safe-haven assets in Switzerland. Even though Prime Minister Lecornu survived a no-confidence vote in parliament last week by watering down President Macron’s signature pension reform, the government’s position remains tenuous, suggesting further capital flight and continued headwinds for French stocks and bonds.

Russia-Ukraine Conflict: A Ukrainian intelligence report based on captured Russian documents shows that the Kremlin’s forces suffered 281,550 casualties in the first eight months of 2025, or an average of 1,159 per day. The casualty count consisted of 158,529 wounded (652 per day), 86,744 killed (357 per day), and 36,277 missing or captured (150 per day). The figures suggest that Russia continues to lose enormous numbers of troops for only limited territorial gains, raising questions about President Putin’s willingness or ability to keep fighting so hard.

• Throughout the modern era of projectile warfare, the ratio of wounded to killed in battle has been remarkably steady at around 3 or 4 to 1. Defense economics nerds (like myself) typically attribute that ratio to the fact that only 20% to 25% of the surface of the human body covers vital organs. Arrows, bullets, or shrapnel striking the body at random are therefore several times more likely to merely wound rather than kill.
• If Russia’s data is correct, the country’s ratio of wounded to killed this year is only 1.83:1, suggesting a much higher-than-expected share of soldiers who were killed. That’s especially striking since modern body armor worn over the vital organs of the torso would suggest a smaller proportion of troops should be killed. It’s not clear why Russia’s ratio seems out of whack, but it could speak to the Russian military’s reputation for callousness toward its own troops and its willingness to use them as “cannon fodder.”

Canada: In an interview with the Financial Times, Industry Minister Mélanie Joly said her new industrial strategy to create jobs and attract more foreign investment would include steps to get Canadian pension funds to invest more of their portfolios at home. According to Joly, the moves are part of a new embrace of “economic nationalism,” which aim to reverse the longstanding trend of Canadian institutions investing less and less in Canada itself. We suspect the moves would create only very marginal headwinds for US stocks or the greenback.

Bolivia: In elections yesterday, centrist Senator Rodrigo Paz won the presidency with about 55% of the vote, ending two decades of rule by the socialists. Paz reportedly appealed to voters by promising stronger ties with the US and more investment in the country’s lithium mining sector. If Paz is successful in rebuilding Bolivia’s ties with the US, it would mark a stark turnaround from the socialists’ courting of US adversaries, such as China, Iran, and Venezuela.

View PDF