U.S. stock futures opened slightly higher at the start of the week, with Nasdaq futures up 0.4%, S&P 500 futures up 0.2%, and Dow Jones futures up 0.1%. These moves come as investors await key U.S. inflation data due on Thursday, which will play a crucial role in shaping the Federal Reserve’s interest rate decisions. Despite recent pullbacks, the S&P 500 remains close to record highs, although concerns over stretched valuations and bond market volatility are adding caution.
Expectations point to August’s Consumer Price Index rising to 2.9%, compared with 2.7% in July. This puts the Fed in a difficult position between supporting a cooling labor market and containing persistent inflationary pressures. Markets are currently pricing in a 25 basis point rate cut at the September 16–17 meeting, with a smaller chance of a 50 basis point cut. The general outlook suggests the Fed may prioritize supporting employment, even if that comes at the expense of higher prices.
In Europe, France faces a crucial political test with a confidence vote on Prime Minister François Bayrou’s fiscal plan, which is widely expected to fail, potentially forcing his resignation. Meanwhile, in Japan, Prime Minister Shigeru Ishiba announced his resignation following a major electoral defeat, creating a political vacuum in the world’s fourth largest economy. These developments impacted markets: the yen weakened notably, while the Nikkei 225 surged on expectations that accommodative monetary policy will continue.
Oil prices climbed more than 1.7% after OPEC+ announced a modest production increase of 137,000 barrels per day in October, far below previous hikes that exceeded half a million barrels. The move underscores Saudi Arabia’s intent to regain market share without flooding supply. Brent closed at $66.59 per barrel, while WTI settled at $62.92, restoring some confidence after last week’s losses.
The U.S. dollar continued to weaken at the start of the week, with the Dollar Index falling to 97.59 after a disappointing jobs report showed sharp employment slowdown and unemployment rising to 4.3%. The euro edged up to 1.1730, supported by stronger German industrial production, though limited by French political risks. Sterling advanced to 1.3520 amid a quiet domestic calendar ahead of next week’s Bank of England meeting. The yen slipped against the dollar, with USD/JPY climbing to 147.80 after Ishiba’s resignation, while the 148.50–149.00 range remains a key resistance zone that could cap further gains.
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