Markets rise on Fed-cut bets as the Nikkei 225 climbs after japan pm resignation, while U.S. CPI and ECB loom large for global risk.
Singapore/London — Monday, September 8, 2025, 4:20 PM IST
Global stocks advanced and Treasury yields stayed softer on Monday as investors priced in a September Federal Reserve rate cut after weak U.S. labor data last week. Sentiment was also shaped by political shocks in Japan and France, with the resignation of Japanese Prime Minister Shigeru Isiba lifting the Nikkei 225 and a looming confidence vote in Paris keeping European markets guarded. Traders are bracing for a pivotal week featuring U.S. CPI, an European Central Bank meeting, and fresh leadership signals in Tokyo, all of which may sway currencies, rates, and risk appetite.
Markets at a glance
Equities were firm across regions in early Monday trading, with S&P 500 futures edging higher and European and Asian benchmarks in the green. The tone reflected relief that U.S. unemployment and hiring undershoots have largely sealed the case for a 25 basis point Fed cut this month, even as markets keep a small probability on a larger move.
Benchmark U.S. yields, which fell sharply on Friday, were steadier but remained below recent highs, reflecting tempered growth and inflation expectations. Lower yields supported equity multiples and gold strength, while the dollar’s mixed performance kept cross-asset relationships in flux as traders navigated political risks in Tokyo and Paris.
Japan political shock and BoJ implications
Japanese assets grabbed the spotlight after japanese prime minister shigeru ishiba resigned, triggering a jump in the Nikkei 225 and pressure on longer-dated Japanese government bonds. Investors wagered that leadership uncertainty would make the Bank of Japan more cautious about near-term rate hikes, reinforcing the appeal of equities leveraged to domestic liquidity.
Attention is turning to who could replace Ishiba and whether a successor might favor looser fiscal and monetary settings. One potential contender, Liberal Democratic Party veteran Sanae Takaichi, has criticized the BoJ’s rate increases, a stance that markets interpret as supportive for risk assets in the short run. For now, the policy path is fluid, and the BoJ’s reaction function will hinge on both leadership dynamics and incoming price data.
The yen’s initial weakness and equity strength underscored the classic “policy patience” trade often seen during Japanese transitions. If the leadership contest drags or produces a cabinet inclined toward stimulus, investors expect the Nikkei 225 to remain bid, even as global growth questions cap cyclicals.
Europe in focus: France and the ECB
In Europe, French assets attempted a cautious rebound as Prime Minister François Bayrou faced a make-or-break confidence vote expected later Monday. While selling pressure has eased in recent sessions, investors remain alert to scenarios in which President Emmanuel Macron could appoint another prime minister or call fresh parliamentary elections, each with distinct market implications.
The European Central Bank meets Thursday and is widely expected to hold rates steady for a second meeting, prioritizing inflation control while monitoring growth softness. A steady ECB, combined with French political uncertainty, keeps peripheral spreads and equity volatility sensitive to headlines, even as value pockets attract selective buying.
Currencies and bonds
The dollar softened into the weekend on the weak jobs read, then traded mixed on Monday as political noise around the yen and euro blunted a broader greenback slide. Against the euro, the dollar slipped only marginally, while it was steadier against the yen as traders weighed Japan risk against lower U.S. yields. Moves in high-beta currencies were more pronounced, reflecting rate-cut hopes in the United States and shifting commodity dynamics.
U.S. Treasury yields hovered near post-payrolls levels, with the 10-year around the low 4% handle and the two-year anchored near the mid-3% area. The shape of the curve suggested markets see cooling growth momentum and a softer inflation glide path, yet remain sensitive to any upside surprise in Wednesday’s CPI.
U.S. outlook: CPI and the Fed
The week’s central macro event is the U.S. CPI report due Wednesday, the last major data point before the Fed’s September meeting. A hotter-than-expected print could tamp down speculation of a larger-than-25 basis point cut, while a benign reading would likely reinforce the prevailing easing narrative and extend risk-on moves.
Read more: India Post Payments Bank Wins 2024 Digital Payments Award
Traders are also parsing the breadth of labor market cooling, looking for signs that the economy is shifting from a soft landing toward a more pronounced slowdown. Rate‑sensitive sectors, particularly housing and small caps, may see outsized reactions to CPI and any Fed communications that firm up the near-term trajectory for policy.
Commodities: Gold and oil
Gold powered to a fresh all-time high near $3,616 an ounce as lower real yields, central bank buying, and geopolitical worries supported the safe-haven bid. The metal’s explosive 2025 momentum follows a strong 2024, and the setup remains favorable if U.S. data endorses a shallower policy path and the dollar’s broader trend stays capped.
Oil prices climbed after OPEC+ signaled a slower pace of output increases from October amid expectations of softer global demand. Brent and West Texas Intermediate gained around 1.6% each, with the curve reflecting caution about inventories and refined product demand, especially if Europe and parts of Asia contend with growth headwinds into year-end.
Expert views
“The latest labor figures raise the risk that conditions are shifting from cooling to weakening, and that could force the Fed to cut faster,” said Paul Mackel, global head of FX research at HSBC. “That opens the door to a softer dollar, although political noise around the yen and euro will channel the pressure unevenly.”
Read more: NH Punjab Surge Discover New Highways Boosting Connectivity
Strategists added that leadership uncertainty in Tokyo complicates rate-hike expectations at the BoJ. With japanese prime minister shigeru ishiba stepping down, markets are now calibrating the balance between political continuity, potential fiscal support, and the timing of any further normalization moves by the central bank.
What, when, where, why
What is moving markets today is a combination of softer U.S. labor data, leadership turmoil in Japan, and political risk in France. When the next catalysts hit is clear, with U.S. CPI due Wednesday and the ECB decision on Thursday, setting the stage for the Fed’s meeting later this month. Where the most acute market reactions may appear is in rate‑sensitive stocks, the yen and euro crosses, and gold, given their sensitivity to yields and policy surprises. Why these events matter is because they will define whether the global soft-landing narrative holds, or whether policy must adapt faster to a weakening backdrop.
Japan PM: succession and market paths
Investors are watching the timeline for naming a successor to japanese prime minister shigeru ishiba, as well as the policy inclinations of the new cabinet. If leadership favors pro-growth fiscal measures and patience on normalization, equities could benefit while the yen stays range-bound or soft. Conversely, faster BoJ tightening under a new team would likely lift the yen and weigh on exporters, even as it stabilizes bond markets.\
Unisex Terry Oversized Tshirt – Best Sele Offer 50% off
The Nikkei 225 remains a barometer for these expectations, especially in financials, industrials, and domestic demand plays. Earnings guidance over the next quarter will further reveal how executives see currency volatility, wage trends, and capex plans interacting with policy signals from Tokyo and Washington.
Timeline and key levels to watch
- U.S. CPI (Wednesday): A cooler print could harden expectations for a 25 bps Fed cut and weaken the dollar anew.
- ECB meeting (Thursday): A hold is expected; any change in guidance on balance sheet or growth risks could move EUR crosses.
- Japan leadership signals (rolling): Successor headlines may jolt the yen and Nikkei 225, with sector rotations tied to policy tone.
- U.S. yields: Ten-year near the low 4% area; sustained breaks lower would likely fuel gold and mega-cap tech bids.
- Oil and gold: Watch for follow-through on OPEC+ guidance and whether gold’s momentum extends on softer data.
FAQs – japanese prime minister shigeru ishiba, Nikkei 225
Why did the Nikkei 225 rise on Monday?
Equities in Japan gained as investors bet that leadership uncertainty after the japan pm resignation would make the BoJ cautious about raising rates, improving liquidity conditions for stocks.
How does japanese prime minister shigeru ishiba resigning affect currencies?
The yen initially softened as traders saw reduced odds of near-term tightening, while the dollar’s path was constrained by weaker U.S. data and event risk from CPI.
What could derail a Fed rate cut this month?
Q:
A: A hotter U.S. CPI on Wednesday could temper talk of a larger cut and even nudge markets toward a more gradual easing path.What is the ECB expected to do this week?
The ECB is widely expected to hold rates steady, while emphasizing vigilance on inflation and monitoring growth and political risks across the euro area.
Why is gold at record highs?
Softer real yields, diversification demand, and safe-haven flows are driving gold to new peaks, especially if policy expectations turn more dovish.
What are the main risks to European markets right now?
Political uncertainty in France, pending rating reviews, and the ECB’s policy stance are the key overhangs, alongside global growth concerns.
Markets are leaning into a “dovish-but-dependent” narrative as the week opens, with the Nikkei 225 buoyed by the japan pm exit, gold at records on softer yields, and U.S. assets tuned to Wednesday’s CPI. The next 72 hours could set the tone for September, determining whether easing hopes deepen or whether data and politics pull investors back to defense.