SINGAPORE/LONDON — Stocks rose and Treasury yields held lower on Monday after last week’s dismal US labour data sealed the case for an interest rate cut this month, with investors preparing for a week heavy on politics, crucial data and central bank activity.
US S&P 500 futures were up about 0.2 percent, leaving the index set to head back towards the record intraday high hit following last week’s jobs data, while European and Asian shares were up 0.2 percent and 0.7 percent, respectively.
The first political drama of the week took place in Japan, where the yen and longer-dated bonds fell and stocks rose following the resignation of Prime Minister Shigeru Ishiba, as traders bet heightened political uncertainty would make the Bank of Japan less likely to raise rates in the near term.
Attention is turning to who will replace Ishiba, and whether it could be an advocate of looser fiscal and monetary policy such as Liberal Democratic Party veteran Sanae Takaichi, who has criticised the BOJ’s interest rate hikes.
Meanwhile, France could be forced to look for its fifth prime minister in three years as the incumbent Francois Bayrou faces a confidence vote on Monday that he is expected to lose.
The selloff in French assets after Bayrou called the vote last month has eased, and French stocks and bonds were slightly outperforming European peers on Monday.
But uncertainty about whether President Emmanuel Macron would try to appoint another prime minister or call fresh parliamentary elections if Bayrou loses means French and wider European assets are not yet out of the woods.
A slew of upcoming French debt rating reviews are also on investors’ radar.
The political uncertainty in France and Japan is also keeping the dollar in check – even after last Friday’s soft jobs data, which has left markets fully pricing in a 25 basis point rate cut from the Fed later this month, and showing a small chance of a 50 basis point cut.
The numbers raise “the question as to whether US employment conditions are now shifting from cooling to deteriorating and if the Fed should cut rates faster,” said Paul Mackel, global head of FX research at HSBC.
