Market Commentary: Monday 8th September

Japanese Prime Minister Shigeru Ishiba announced on Sunday that he intends to step down after a series of poor election results for his Liberal Democratic Party coalition in both chambers of parliament. The JPY fell 0.39% against the USD and is currently trading at 148.06. The Nikkei 225 rallied 1.2%, as the market anticipates the next LDP leader will lean more towards fiscal stimulus. Long-end JGBs are the most vulnerable and under heavy selling pressure, given concerns over increased government spending.

Political uncertainty also continues in Europe. French Prime Minister François Bayrou is facing a no-confidence vote in France’s lower house after his push to narrow France’s 2026 deficit from 5.4% of economic output to 4.6%. If Bayrou loses the vote, President Emmanuel Macron’s options include naming a new premier or dissolving the lower house and calling early elections.

In the U.S., following last Friday’s weak Non-Farm Payroll data, all eyes are on the upcoming CPI report this Thursday, ahead of the Fed’s rate decision on Sept. 17.

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