Japan’s PM Ishiba calls it a day; US jobs growth stalls

Global markets start the week to some extra political uncertainty as Japan’s prime minister Shigeru Ishiba called it a day after the deal struck with the US wasn’t enough to save his ailing premiership, while France’s government is facing a likely collapse in an upcoming confidence vote.

Meanwhile, traders ramped up their bets on a rate cut from the Federal Reserve this month after the closely-watched US nonfarm payrolls figures showed much softer jobs growth than forecast, setting a higher barrier for inflation data this week to deter the central bank from acting.

Australian futures are pointing to a soft start to the week after Wall Street’s weak Friday, while New Zealand’s S&P/NZX 50 index is coming off its best week since May ahead of Briscoe Group’s earnings on Wednesday and as a string of companies shed rights to their dividends in the coming days.

And Brent crude oil futures firmed after the Organization of the Petroleum Exporting Countries agreed to raise production in October as they continue to roll back earlier reductions in output.

It’s politics

The kiwi dollar climbed to 87.41 yen at 7.30am in Auckland from 86.86 yen at 7am and 86.84 yen last week in an early reaction to the resignation of Japanese prime minister Shigeru Ishiba on Sunday.

Ishiba’s future was seen as being uncertain after a string of election defeats, with the tariff deal struck with the US securing lower import levies for auto exports not enough to save his premiership.

“Japanese financial markets will be in focus to start the week after prime minster Ishiba said he will step down,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “His departure will create uncertainty for investors at a time when long term Japanese government bond yields are near all-time highs.”

Meanwhile, France’s prime minister Francois Bayrou faces a likely ouster in a confidence vote on Monday over a tight budget that sought to cut public debt by €44 billion.

The kiwi dollar traded at 50.29 euro cents from 50.22 cents last week.

Global bond markets creaked last week as investors questioned the fiscal tracks for policymakers around the world, although yields have since eased amid heightened expectations the US Federal Reserve will cut the federal funds rate this month. US nonfarm payrolls data showed the world's biggest economy added just 22,000 jobs in August, less than a third of what economists were predicting.

Bigger is better?

Traders are now pricing in an outside chance of a half-percentage point reduction at the Fed’s meeting, with inflation data later this week seen as the only hurdle – with an increasingly high barrier – to the central bank moving.

Australian futures are pointing to a 0.2% decline for the S&P/ASX 200 index when trading opens across the Tasman, following a soft lead from Wall Street on Friday as investors digested the weak employment data.

The kiwi dollar rose to 58.89 US cents at 7am in Auckland from 58.59 cents last week.

New Zealand’s NZX50 is coming off its strongest week since May, with Briscoe scheduled to report on Wednesday as investors’ minds turn to the group of retailers reporting.

Channel Infrastructure sheds rights to its 6.25 cents per share dividend today, with a steady string of companies going ex-dividend over the coming days.

Meanwhile, eight OPEC members said they will boost oil production by 137,000 barrels a day in October as they start to roll back reductions previously imposed. Brent crude oil futures rose 0.3% to US$65.67 a barrel.

“The increase, which follows its fast-tracked restoration of idled capacity, will add to concerns that supply will run ahead of demand into the end of the year,” BNZ’s Ritson said.

And in the burgeoning artificial intelligence sector, Reuters reported Dutch chipmaking equipment supplier ASML is investing €1.3 billion in French AI startup Mistral AI to become the firm’s biggest shareholder, while The Information reported that OpenAI’s projected cash burn has climbed US$80 billion over the next four years to US$115 billion through 20209.

Reporting by Paul McBeth. Image from taro ohtani on Unsplash.