Introduction: Japan’s economy contracts as exports are hit by US tariffs
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Donald Trump’s trade wars continue to bruise the global economy, dampening demand and weakening trade links.
Japan is the latest country to show the effects – its economy has shrunk for the first time in six quarters.
Japanese GDP fell by 0.4% in the July-September quarter, new official data shows, as its manufacturers’ exports were hit by the tariffs imposed by the US this year.
Exports were a key driver of the contraction; they fell by 1.2% compared with the April-June quarter, and were 4.5% lower than a year ago.
Back in April, Trump threatened Japan with a new 25% tariff on its goods at the US border, which was cut to 15% in July when the two countries reached a trade deal.
Private demand also fell, by 0.3% quarter-on-quarter.
On an annualised basis, Japan’s real gross domestic product shrank by 1.8% on an annualized basis in the three months through September. Although that’s better than the 2.4% fall which economists had expected, it could bolster new prime minister Sanae Takaichi’s case to compile an ambitious stimulus programme.
Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities says (via Bloomberg):
“Japan’s economy was solid in the first half of this year and today’s GDP showed that momentum is halted temporarily.
I expect Japan’s economy to be back on a moderate recovery trend going forward.”
The White House has belatedly woken up to the impact of tariffs on Americans (who pay the levies) too – late last week, Trump lowered the tariffs on food imports, including beef, tomatoes, coffee and bananas, amid growing concerns about rising costs.
The agenda
8am GMT: Swiss GDP report for Q3
10am GMT: European Commission releases Autumn 2025 Economic Forecast
3pm GMT: US construction spending data for August
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Updated at 03.43 EST
Key events
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Peter Thiel’s fund offloaded Nvidia stake in third quarter
Another interesting trade to flag…..tech billionaire Peter Thiel’s hedge fund has sold off its entire stake in Nvidia during the third quarter.
The sale, in a regulatory filing, intensifying worries of an artificial intelligence bubble.
The fund, Thiel Macro, sold around 537,742 shares in the AI chip frontrunner in the quarter, the filing showed on Friday. The stake would have been worth around $100m, as of the company’s closing price on September 30, according to Reuters….
This is the second major investor to divest from Nvidia, following SoftBank…
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Bank of England policymaker Catherine Mann has warned that UK businesses are continuing to react to elevated levels of inflation.
In a sign that Mann, for one, will not ease off in the battle against inflation, she has insisted there is “work to do” to get inflation back to the BOE’s 2% target.
She pointed to evidence that firms are paying attention to inflation when they come up with their one-year ahead pricing strategies, Bloomberg reports.
Mann told a King’s College London event:
“For me as a decision maker, that means the underlying dynamic for inflation continues to show upside risk,”
“In a high inflation environment, there’s this asymmetry. Firms are far more likely to raise prices than to reduce them.”
Mann was one of five policymakers who voted to leave UK interest rates on hold earlier this month, narrowly outvoting the four who wanted a cut.
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The entire AI trade likely depends on Nvidia earnings due on Wednesday, warns Neil Wilson, UK investor strategist at Saxo Markets:
Earnings are seen +54% to $1.25 per share with revenues +56% yoy to $54.8bn.
Analysts are sounding upbeat ahead of the report with guidance expected to be strong on continued ramp of the GB300 advanced AI servers and generally insatiable AI demand as hyperscalers continue to bolster capex.
But the bar is set very high and we know that if investors are starting to wobble the whole house of cards can come crashing down at any point.
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Alphabet shares jump after Warren Buffett reveals stake
Wall Street’s has opened slightly lower, at the start of a busy week that will bring us a flurry of delayed US economic data and results from Nvidia.
The Dow Jones Industrial Average fell 79.4 points, or 0.17%, at the open to 47068.06, while the broader S&P 500 is down 03% and the Nasdaq has lost 0.5%.
Alphabet’s shares are flying, though – they’re up 5.5% after Warren Buffett’s Berkshire Hathaway revealed it has build a multi-billion dollar stake in the company.
A filing on Friday showed that Berkshire owned 17.85 million shares in Google’s parent at the end of September.
Buffett is due to step down as CEO of Berkshire Hathaway at the end of this year, so this could be one of the company’s last major trading moves under his leadership.
Alphabet are heavily involved in the artificial intelligence sector, with Google having bought AI research laboratory DeepMind in 2014.
Google is also expected to unveil Gemini 3.0, its next major AI model, soon.
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Updated at 10.11 EST
AXA Investment Managers has revealed that it cut its exposure to UK government bonds on Friday.
AXA halved its exposure to UK bonds in some of its portfolios on Friday following news that the government has no plans to raise income tax, a senior fund manager has told Reuters.
Nicolas Trindade, who manages global and sterling bond portfolios for the firm, says:
“We are much less comfortable going into the budget.”
UK bond yields jumped on Friday, as the price of the debt fell, after it emerged that chancellor Rachel Reeves had abandoned plans to raise the headline rate of income tax.
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The City has given a mixed reception to a proposed merger of two infrastructure giants.
The proposed combination of HICL Infrastructure and The Renewables Infrastructure Group (TRIG) will create the UK’s largest listed infrastructure investment company with net assets in excess of £5.3bn, they told the City this morning.
The boards of HICL and TRIG have signed detailed heads of terms for the deal, under which TRIG would be reconstructed and wound up, with its assets transferred to HICL in return for new HICL shares and cash.
The two companies say they have received a “positive market sounding” from large shareholders of both companies. However, HICL’s shares have fallen by 7.3% today while TRIG are up 3.3%.
HICL was the first infrastructure investment company listed on the London Stock Exchange in 2006, and owns a range of infrastucture assets including a portfolio of schools and universities in the UK, Ireland and France, a stake in Affinity Water, and an interest in London St. Pancras Highspeed, the rail link between London St Pancras station and the Channel tunnel.
TRIG is focused on renewable energy assets, including a 10% stake in Hornsea One, the wind farm off the Yorkshire coastline.
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Germany’s finance minister heads to China for trade talks
Lisa O’Carroll
Germany’s finance minister is due to arrive in Beijing today as tensions between China and Europe over supply of chips deepen.
Lars Klingbeil’s trip will be the first visit to China by a cabinet minister of the current German government and comes as trade figures show that Germany, once the engine of European manufacturing, is now importing more from China than it is exporting.
It also comes weeks after a cancelled visit by foreign minister Johann Wadephul.
China overtook the US largest trading partner in the first eight months of 2025 fuelling European fears that Beijing has been redirecting exports to the EU in the wake of the trade war ignited by Donald Trump.
Germany faces a record trade deficit of €87bn with China this year, according to a forecast by state-owned international economic promotion agency Germany Trade & Invest.
“Germany is uniquely exposed to the risks of Chinese industrial overcapacity—and it’s going to hit very hard,” said Jacob Gunter, head of the economy and industry programme at the think tank Merics.
The dependency of Europe including the UK on China for everything from semi-conductors, to rare earths and critical raw materials, has come into sharp focus in the last two months after the Dutch government effectively took control of the Chinese-owned chip maker Nexperia.
That triggered a fierce response from Beijing, which slapped a global ban on exports of Nexperia’s finished chips, which in turn led to Dutch economy minister Vincent Karremans telling the Guardian that the crisis was a “wake up call” for Europe and the west. A Dutch delegation is also due to land in Beijing this week to try and resolve the matter.
In Germany, politicians have called for a full-blown reassessment of policy towards Beijing, some accusing the previous Social Democrat-led government of having let Germany become too dependent on Beijing.
Germany’s parliament appointed an expert commission on Thursday to rethink trade policy towards China, which on Friday hit out at Karremans blaming him for the extraordinary chip row and expressing “extreme disappointment” with him.
Volker Treier, head of foreign trade at the German Chamber of Commerce DIHK, says:
“The Nexperia example should spur us to talk and demand transparency – otherwise a business problem gets used as a geopolitical issue.”
Juergen Hardt, foreign policy spokesperson for chancellor Friedrich Merz’s CDU party, adds:
“It must be clear to the Chinese government that we cannot accept economic and political interests being mixed together.”
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Updated at 08.04 EST
Amazon founder Jeff Bezos is making a move into the AI world.
Bezos is to serve as co-chief executive officer of a new artificial intelligence startup that focuses on AI for engineering and manufacturing of computers, automobiles and spacecraft, the New York Times is reporting.
The company, called Project Prometheus, has garnered $6.2bn (£4.7bn) in funding, partly from the Amazon founder, making it one of the most well-financed early-stage startups in the world, the report said, citing three people familiar with the company.
This is the first time Bezos has taken a formal operational role in a company since he stepped down as the CEO of Amazon in July 2021, Reuters points out. Though he is involved in Blue Origin, his official title at the space firm is founder.
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Shares in Google’s parent company are set to rally in a few hours time in New York, after Warren Buffett’s Berkshire Hathaway group revealed it has bought a stake in the tech giant.
Alphabet’s shares are up 4.9% in pre-market trading, after a filing on Friday showed that Berkshire owned 17.85 million shares in Google’s parent at the end of September.
This could be one of Berkshire’s last trading moves under Buffett, who is due to step down as CEO of the company at the end of this year.
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Despite the challenges facing WPP, its chairman could soon be adding a new job to his responsibilities.
Sky News reports that Philip Jansen will be named as the next chairman of Heathrow Airport later this month. They say Jansen got the nod partly thanks to his experience running BT, which like Heathrow is a regulated utility.
Heathrow is currently pressing on with its plans for a privately financed third runway and associated airport improvements, at an estimated cost of almost £50bn. A decision on the third runway is expect by the end of this parliament.
Jansen became chair of WPP at the start of this year, and last week gave it a vote of confidence by buying 50,000 shares in the company.
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Updated at 06.02 EST
