By Mike Dolan
LONDON (Reuters) – What matters in U.S. and global markets today
By Mike Dolan, Editor-At-Large, Finance and Markets
Markets face a politically-charged start to the week in Japan and France, but attention will soon turn back to the U.S. where interest rate markets are once again mulling the chance of half-point Federal Reserve rate cut next week after another soft August payrolls report jarred markets on Friday.
Ahead of August inflation reports due later in the week and annual payroll revisions out tomorrow, two- and 10-year Treasury yields on Friday plunged to their lowest levels since April, while the dollar and S&P 500 stocks fell.
* Japan’s Nikkei rose as the yen weakened slightly after Prime Minister Shigeru Ishiba resigned on Sunday and ruling Liberal Democratic lawmakers prepared bids to replace him – with fiscal dove Sanae Takaichi and Shinjiro Koizumi the frontrunners. But with market bets on an October Bank of Japan rate rise halved to just a 20% chance over the past week, Japan’s 30-year bond yield climbed to new record highs. French stocks, bond prices and the euro were firmer, however, as the latest French government faces a confidence vote today.
* Friday’s U.S. employment report showed the jobless rate ticking up to its highest in four years, as expected, but weak job creation reinforced fears of a weakening labor market. Even though Fed officials are in a blackout period ahead of next week’s meeting, this week’s CPI report will now be critical to the outcome and the New York Fed’s inflation expectations survey is due later today. Political pressure on the Fed intensified on Friday as Treasury Secretary Scott Bessent called for renewed scrutiny of the Federal Reserve, including its power to set interest rates, as the Trump administration intensifies its efforts to exert control over a central bank.
* Elsewhere, world stocks were generally higher – even in China where the latest trade numbers showed China’s export growth slowed to a six-month low in August and imports also missed forecasts. China’s exports to the U.S. fell 33.12% year-on-year in August, while its shipments to Southeast Asian nations rose 22.5% in the same period. Oil prices climbed more than $1, regaining some of last week’s losses, after the weekend OPEC+ output hike was seen as modest due to concerns over more sanctions on Russian crude. The European Central Bank meets on Thursday, with economists expecting no change to policy rates as inflation hovers near the central bank’s 2% target.
Today’s column looks at why the dollar’s much-vaunted ‘safe haven’ status during the 2008 bank crash may have been a mirage.
Today’s Market Minute
* U.S. President Donald Trump said on Sunday he is ready to move to a second phase of sanctioning Russia, the closest he has come to suggesting he is on the verge of ramping up sanctions against Moscow or its oil buyers over the war in Ukraine.
* Ruling party lawmakers in Japan prepared their bids to replace outgoing premier Shigeru Ishiba on Monday, as financial markets recoiled on the political uncertainty and the possibility of his successors ramping up government spending.
* South Korean Foreign Minister Cho Hyun will head to the U.S. on Monday as he seeks to resolve the fallout over the detention of hundreds of Korean workers during an immigration raid at a time when Seoul has committed to massive investment plans in America.
* OPEC+’s surprise announcement that it will further accelerate oil production may seem like a threat to an already oversupplied market, but ROI energy columnist Ron Bousso argues that the actual market impact is likely to be limited.
* Summer is over, and TPW Advisory Founder Jay Pelosky says that means one thing: we’re about to see fund managers’ mad dash to year-end as everyone seeks to boost performance. He offers three counterintuitive points to keep in mind amid the scramble.
Chart of the day
France’s fourth prime minister in three years, François Bayrou, faces almost certain defeat in a confidence vote, tipping the euro zone’s second-biggest economy further into political uncertainty. The upheaval threatens France’s ability to rein in its debt, with the risk of further credit downgrades looming and Fitch due to give its verdict on Friday. France faces acute pressure to repair its finances, with last year’s deficit nearly double the EU’s 3% limit of economic output and public debt at 113.9% of GDP.
Today’s events to watch
* U.S. August employment trends (10:00 AM ET), July consumer credit (3:00 PM ET), New York Fed’s August survey of consumer expectations
* French parliament holds confidence vote in government, National Assembly begins meeting at 8:00 AM ET
* Norwegian Parliament election, final day of voting
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(The opinions expressed here are those of the author, a columnist for Reuters)
(by Mike Dolan; Editing by Kevin Liffey)
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