Lead: Global markets rallied on Monday, Sept. 8, 2025, as weaker-than-expected U.S. jobs data intensified bets that the Federal Reserve will cut interest rates this month. Stock indexes rose across the region while gold held near record levels and U.S. Treasury yields eased. The yen weakened to 148.39 per dollar following the surprise resignation of Japanese Prime Minister Shigeru Ishiba, injecting fresh political uncertainty in Tokyo. Investors also monitored French political turmoil and an upcoming U.S. inflation print that could temper rate-cut expectations.
Key Takeaways
- U.S. August jobs data came in well below forecasts, prompting markets to fully price a 25 basis-point Fed cut this month and a modest chance (8%) of a 50 bps move.
- Traders expect roughly 68 basis points of Fed easing by year-end, pushing two-year U.S. yields to about 3.527% (up 2 bps), near a recent five-month low of 3.464%.
- The yen depreciated 0.6% to 148.39 per dollar after Prime Minister Shigeru Ishiba resigned, while the Nikkei climbed 1.8%, close to its recent record high.
- Japan’s 10-year JGB yield was around 1.57%, and the 30-year yield stood at roughly 3.278%, near a record 3.292% that signals higher long-term borrowing costs.
- Gold traded near $3,588 per ounce, only shy of the $3,600 mark and up about 37% year-to-date after a 27% gain in 2024.
- Oil rose over 1% as OPEC+ agreed to raise output at a slower pace from October amid weaker demand expectations.
- Political uncertainty in Japan and France is seen as a constraint on market exuberance despite bullish rate-cut pricing in the U.S.
Background
The market move on Sept. 8 followed a surprise slowdown in U.S. payroll growth for August, which reduced near-term rate-wariness and increased the odds of policy easing by the Federal Reserve. Investors recalibrated expectations across asset classes: equities advanced on reduced terminal-rate fears, sovereign yields pulled back, and safe-haven gold pushed toward record levels. This reaction built on a week in which long-end bond yields in several countries had already been elevated amid fiscal and structural concerns across advanced economies.
Political developments amplified the sensitivity. In Tokyo, the sudden resignation of Prime Minister Shigeru Ishiba — a development market participants did not expect — raised questions about the next administration’s fiscal and monetary stance, particularly the potential for looser policy under contenders such as LDP veteran Sanae Takaichi. In Paris, François Bayrou faced a confidence vote that could make him France’s fifth prime minister in three years, adding to euro-area risk considerations.
Main Event
Asian markets opened higher on Monday as traders digested the U.S. labor report and repositioned for easier Fed policy. Japan’s equity benchmark, the Nikkei 225, surged 1.8% as some investors priced in lower global yields and a more favorable backdrop for growth-sensitive stocks. At the same time, the yen slid across the board, quoted at about 148.39 per dollar, reflecting concern about political stability and prospective policy shifts in Tokyo.
U.S. Treasury yields hovered near five-month lows; two-year yields were roughly 3.527% after a small uptick, while longer-dated yields eased further amid increased demand for duration. Gold remained bid around $3,588 an ounce, reflecting both the weaker dollar and expectations for easier U.S. policy. Commodity markets also reacted: Brent and West Texas Intermediate both climbed more than 1% after OPEC+ agreed to a slower-than-expected production increase starting in October.
Market commentators emphasized that the resignations and looming confidence votes in key G7 economies would likely cap any uncontrolled rally. The 30-year Japanese government bond yield near 3.278%, not far from a record 3.292%, underscores how higher long-term borrowing costs could constrain fiscal options for any incoming leader in Tokyo. Meanwhile, European futures were up modestly, and S&P 500 futures showed a slight positive bias following a volatile session that left the index close to record territory.
Analysis & Implications
The immediate market implication of weak U.S. payrolls is a higher probability of Fed easing in September, which supports risk assets and weighs on the dollar. However, central banks and investors will watch the U.S. inflation print due Thursday closely; a hotter reading could quickly reduce the odds of a large easing cycle. The current pricing — a near-certainty of a 25 bps cut and a small chance of a 50 bps move — balances growth concerns with persistent inflation uncertainty.
In Japan, leadership turnover increases policy ambiguity. If a successor sympathetic to looser fiscal and monetary policy were to gain influence, that could further weaken the yen and pressure yields higher at the long end, complicating the Bank of Japan’s calibration of policy. Conversely, a cautious successor could stabilize markets; at present, the identity and platform of Ishiba’s replacement remain unknown, keeping investors on edge.
France’s political fragility amplifies euro-area risk. Should François Bayrou lose the confidence vote and prompt another government reshuffle, European sovereign spreads and short-term volatility could rise, limiting the appetite for cyclical assets despite easier U.S. policy. Collectively, political uncertainty in major economies acts as a brake on the otherwise supportive narrative of lower U.S. rates.
Comparison & Data
| Instrument | Recent Level | Notable Reference |
|---|---|---|
| USD/JPY | 148.39 | down 0.6% on Sept. 8 |
| Nikkei 225 | up 1.8% | near recent record high |
| 10-yr JGB yield | 1.57% | flat on session |
| 30-yr JGB yield | 3.278% | near record 3.292% |
| Gold | $3,588/oz | ~37% YTD gain |
| U.S. 2-yr yield | 3.527% | near five-month low 3.464% |
These levels show how political shocks can interact with macro data to move both rates and risk assets. The combination of lower short-term U.S. yields and elevated long-term yields in some countries highlights divergent monetary and fiscal pressures across markets.
Reactions & Quotes
Market strategists framed the Japan development through the lens of policy uncertainty and its potential impact on inflation and central-bank responses.
“Markets will be assessing what a new leader means for fiscal policy, inflation and the Bank of Japan’s reaction function,”
Kyle Rodda, Capital.com (market analyst)
Rodda’s comment followed market moves that tied the yen’s weakness to questions about the next administration’s stance on spending and rate policy. Separately, asset managers reiterated their view that U.S. policy easing is now more probable after the jobs report.
“The Fed has more than enough reasons to cut by 25 bps, with additional easing likely within months,”
George Boubouras, K2 Asset Management (head of research)
Boubouras emphasized that lower cash rates in the U.S. would support equities, though he warned that absent clear Fed guidance equity momentum could falter. Official spokespeople in Tokyo and Paris have signaled that transitions could be orderly, but investors remain cautious.
Unconfirmed
- The exact policy platform and timing of any fiscal changes from Ishiba’s successor remain unconfirmed and will be clearer only after formal party nominations.
- Reports of an imminent large (50 bps) Fed cut are speculative; market-implied odds were about 8% and could change materially after U.S. inflation data.
Bottom Line
Weaker U.S. labour data has tilted markets toward expecting Fed easing in September, boosting equities and risk assets while pressuring the dollar and lifting gold. Yet political shocks in Japan and France inject fresh uncertainty that could limit any unchecked rally and keep volatility elevated. Market participants should watch the U.S. inflation release, leadership signals from Tokyo, and the outcome of the French confidence vote as the near-term catalysts that will determine whether the current sentiment becomes a sustained trend.
For investors, the balance of policy easing expectations versus geopolitical and fiscal uncertainty argues for disciplined risk management: targeted exposures to cyclical assets may benefit from easier policy, but hedges against currency and sovereign-risk moves remain prudent until political outcomes are clarified.