Stocks are rising, the dollar is fluctuating as interest rate cuts are expected, and the yen is falling due to political uncertainty in Japan
Global markets experienced a volatile start to the week, reacting to disappointing US jobs data and the sudden resignation of the Japanese Prime Minister, pushing investors towards stocks while the US dollar wobbled.
US data shock and its impact on Fed policy
Monday's trading opened on a wave of cautious optimism in the markets, after the weak US jobs data for August settled the expectations on the policy of the US central bank (Federal Reserve).
The data showed a slowdown in the pace of jobs in the world's largest economy, reinforcing investors expectations that the Federal Reserve will have to cut interest rates soon to support growth.
This expectation led to gold prices stabilizing near all-time highs, while US Treasury yields fell to near 5-month lows.
The political earthquake in Japan shakes the currency markets
On the other hand, the sudden resignation of Japanese prime minister Shigeru Ishiba was a major pressure factor on the Japanese yen, which fell against most major currencies.
Investors are afraid of the political uncertainty that will hang over the country, and how this will affect economic policies, especially regarding the policy of the Central Bank of Japan.
Investors were also particularly worried about the possible takeover of Sanae Takaichi, a critic of the central bank's policies, which could disrupt plans to raise interest rates in the future.
On the stock side, the Nikkei 225 index benefited from the weakening yen with a rise of 1.8%.
The dividend landscape and the prospects for interest rate cuts
A rate cut by the US Federal Reserve later this month is almost certain in the eyes of the market. The CME FedWatch tool suggests that the market is fully pricing in a 25 basis point cut, with an 8% probability of a 50-point larger cut.
Traders expect an overall easing of up to 68 basis points by the end of the year, and this trend is reinforced by the fact that US interest rates remain high compared to other developed economies, which makes the reduction necessary to maintain growth momentum.
Oil rises with the support of the OPEC agreement
In the commodities market, oil prices jumped by more than 1.5% at the beginning of trading, supported by the OPEC alliance's agreement over the weekend to increase production at a slower pace than expected starting next October, amid expectations of weak global demand for crude.
A look into the future: US inflation is in the foreground
The upcoming US inflation report, scheduled for release on Thursday, will be the focus of investors attention this week.
This report will help assess the risks of rising prices and their impact on the expected pace of interest cuts from the Fed, as high inflation may cool the central bank's enthusiasm for significant monetary easing.
