On Sept. 8, 2025, global markets rallied after U.S. August payrolls came in well below expectations, strengthening bets that the Federal Reserve will cut interest rates later this month. Stocks in Asia and Europe climbed while the dollar wavered and gold hovered near record highs. The yen weakened sharply after Japanese Prime Minister Shigeru Ishiba resigned, adding political uncertainty that tempered some investor enthusiasm. Treasury yields drifted close to five-month lows as traders priced a higher probability of Fed easing.
Key takeaways
- U.S. August jobs data surprised to the downside on Sept. 5, reinforcing market expectations for a Fed rate cut in September.
- Market pricing on the CME FedWatch tool showed traders fully priced a 25 basis point cut for later this month and placed an 8% chance on a 50 bps move; markets expect about 68 bps of easing by year-end.
- The yen fell about 0.6% to 148.39 per U.S. dollar, while the Nikkei surged 1.8% and neared recent record highs.
- Japan’s 10-year government bond yield was 1.57%, and the 30-year JGB yield was around 3.278%, close to its record high of 3.292%.
- Gold traded at $3,588 per ounce, up roughly 37% year-to-date after a 27% rise in 2024; safe-haven demand supported prices.
- European futures rose about 0.45% and S&P 500 futures gained 0.08% after a choppy session that left U.S. equities near recent records.
- OPEC+ agreed to raise output more slowly from October, helping push Brent and WTI prices up by more than 1% each.
Background
Markets have spent the past weeks reassessing the balance between resilient economic data and signs of cooling, particularly in labour markets. The unexpectedly weak U.S. August payrolls shifted consensus toward imminent Fed easing, reversing some of the upward pressure on yields that had dominated earlier. Central banks across major economies are navigating a narrow path: tame inflation without throttling growth. That backdrop has amplified the sensitivity of asset prices to both macroeconomic prints and political developments.
Japan’s political developments come at a delicate moment for its financial markets and policy settings. Prime Minister Shigeru Ishiba’s resignation opens a contest for the Liberal Democratic Party leadership and the premiership, with markets watching closely for candidates’ stances on fiscal stimulus and monetary policy. France also faces political strain—Francois Bayrou was scheduled for a confidence vote that market commentary suggested he was likely to lose—adding to concerns about governance in several developed economies.
Main event
The immediate market reaction on Sept. 8 reflected two dominant forces: the repricing of Fed policy after soft U.S. jobs data and renewed political uncertainty out of Tokyo. Traders pushed short-term U.S. yields lower, with the two-year Treasury at roughly 3.527%, near the five-month low of 3.464% recorded the prior Friday. Equities broadly responded positively to the prospect of easier monetary policy in the United States, while safe-haven assets like gold remained bid.
In currency markets, the yen’s slide was pronounced: it weakened about 0.6% to 148.39 per dollar, pressured by concerns that a new Japanese leader could pursue looser fiscal and monetary settings. The Nikkei index jumped 1.8%, reflecting both currency effects and renewed investor interest in Japanese equities even as bond yields at the long end climbed. The 10-year JGB yield was essentially unchanged at 1.57% while the 30-year yield sat near 3.278%.
Commodity markets reacted to policy and demand signals. Gold held near $3,588 per ounce, underpinned by lower real yields and Fed-cut expectations. Oil rose after OPEC+ agreed on a slower output increase from October, with both Brent and U.S. WTI up north of 1% as markets weighed the prospect of softer global demand against controlled supply growth.
Analysis & implications
Short-term market moves are consistent with a narrative where weaker U.S. labour data accelerates Fed easing expectations, reducing near-term Treasury yields and supporting risk assets. Lower short-term yields make equities more attractive in the immediate term, but the extent of the rally will depend on forthcoming inflation prints—U.S. CPI due this week will be pivotal. A hotter-than-expected CPI could quickly unnerve markets and reverse some of the repricing.
Japan’s political uncertainty poses a different kind of risk: it affects policy trajectory rather than the timing of a single data release. If a successor to Ishiba—market commentators have flagged Liberal Democratic Party veteran Sanae Takaichi as a possible contender—advocates looser fiscal or more accommodative monetary responses, investors could see renewed pressure on the yen and rising long-end yields as borrowing costs and policy credibility are reassessed.
For global fixed income, the interplay between Fed easing expectations and country-specific fiscal stresses—evident in elevated long-end yields in Britain, France and Japan—could sustain volatility. Investors may prefer duration in jurisdictions where central banks are still relatively restrictive, but large fiscal deficits and political turnover could push longer-term yields higher, raising borrowing costs for governments.
Finally, commodities and FX moves underline that monetary policy expectations and geopolitics are linked. A sequence of Fed cuts would typically weigh on the dollar, supporting gold; at the same time, country-specific political shocks (Japan, France) can produce divergent currency and equity outcomes that complicate cross-asset hedging strategies.
Comparison & data
| Series | Recent level | Reference/High |
|---|---|---|
| USD/JPY | 148.39 | – |
| Nikkei | +1.8% (session) | Near recent record |
| 10-yr JGB yield | 1.57% | – |
| 30-yr JGB yield | 3.278% | Record 3.292% |
| Gold | $3,588/oz | Near $3,600 milestone |
| U.S. 2-yr Treasury | 3.527% | 5-month low 3.464% |
The table highlights the focal points for markets on Sept. 8: currency moves, Japanese bond stress at the long end, and precious metals near record levels. Together they illustrate how cross-market links—policy expectations, political risk and safe-haven demand—are shaping asset allocation decisions ahead of key data releases.
Reactions & quotes
Market analysts emphasized that political signals in Tokyo will influence whether the yen’s slide and the rise in long-term JGB yields persist. Capital.com’s senior analyst framed market attention around policy direction and inflation outcomes.
The markets are going to be framing this around what it means for fiscal policy, inflation and the BOJ’s response.
Kyle Rodda, senior financial market analyst, Capital.com
Portfolio managers noted that weaker U.S. labour data gives the Fed room to cut, and that anticipated cuts are already being fed into asset prices. The head of research at K2 Asset Management described the path he expects for rates this year.
The Fed has more than enough reasons and will cut by 25 bps … with another two within six months.
George Boubouras, head of research, K2 Asset Management
Unconfirmed
- Who will succeed Shigeru Ishiba is not yet decided; market commentary cites several candidates but outcomes remain uncertain.
- The exact size and timing of Fed cuts beyond a September move are projections based on market pricing and are not Fed commitments.
- The expected loss of Francois Bayrou in a confidence vote was widely reported in market commentary but could change if political maneuvers alter the arithmetic.
Bottom line
The Sept. 8 market response shows how a single macro surprise—weak U.S. payrolls—can quickly shift policy expectations and lift risk assets, while political shocks in major economies (Japan, France) can simultaneously inject fresh uncertainty. Investors should watch U.S. CPI due this week as the key economic test that could either cement or reverse the Fed-cut narrative priced into markets.
In Japan, the identity and policy stance of Ishiba’s successor will be a primary driver of the yen and JGB curves; a leader favoring looser fiscal or monetary policy could deepen the yen’s slide and raise long-term yields. For portfolio managers, the near-term challenge is balancing exposure to rate-sensitive assets against the risk of renewed political or inflation surprises that could reprice risk premia across markets.