U.S. stock futures moved higher on Monday as investors positioned themselves ahead of critical inflation data and considered the likelihood of upcoming interest rate cuts by the Federal Reserve. At the same time, political uncertainty in France and Japan, along with a surge in oil prices following OPEC+ production announcements, are shaping investor sentiment.
Futures Tick Up
By 03:32 ET, S&P 500 futures were up 13 points (0.2%), Nasdaq 100 futures rose 90 points (0.4%), and Dow Jones futures gained 65 points (0.1%). Last Friday, the main U.S. indices retreated after softer-than-expected August nonfarm payrolls highlighted a cooling labor market. The data reinforced expectations that the Fed may reduce rates by at least 25 basis points during its September 16-17 meeting, with the possibility of a larger 50-point cut also being discussed.
Despite Friday’s pullback, the S&P 500 remains near record highs reached on Thursday. Analysts note that September historically presents weaker market sentiment. Elevated valuations, uncertainties over U.S. trade policies, rising government bond yields, and concerns about the sustainability of the AI sector all weigh on investor confidence heading into the week.
Inflation Data in Focus
Investors’ attention now turns to Thursday’s U.S. consumer price index (CPI) for August, a key measure of inflation. Consensus forecasts suggest a 2.9% year-on-year increase, up from 2.7% in July. At this pace, the Fed faces the delicate challenge of balancing its dual mandate: supporting employment while keeping inflation near its 2% long-term target.
A rate cut could help stimulate hiring and investment, but it may also risk fueling higher prices. Fed officials, including Chair Jerome Powell, have indicated that they may prioritize labor market support, leaving markets to interpret prior statements as guidance ahead of the next policy decision.
French Confidence Vote
Political developments in France may limit market upside. A confidence vote on Prime Minister François Bayrou’s fiscal plan is expected on Monday. If opposition parties reject the plan, Bayrou may be required to resign and submit his resignation to President Emmanuel Macron.
The French government aims to reduce its deficit from 4.6% of GDP to 2.8% by 2029 through a combination of spending cuts and structural reforms totaling €43.8 billion. The plan has faced opposition from voters, including resistance to proposals such as the elimination of certain public holidays. Following the announcement of the vote, French 30-year bond yields have climbed to levels not seen since June 2009.
Japan’s Leadership Change
In Japan, political instability also increased after Prime Minister Shigeru Ishiba announced his resignation as leader of the Liberal Democratic Party, weeks after a significant defeat in upper house elections. The resignation, which follows a U.S.-Japan trade agreement reducing tariffs on Japanese goods, opens the possibility of a leadership contest in the world’s fourth-largest economy.
The Japanese yen initially weakened against the U.S. dollar following Ishiba’s announcement but recovered part of its losses. The Nikkei 225 rose, while 10-year government bond yields remained relatively unchanged.
Oil Prices Surge
Crude oil prices jumped after OPEC+ agreed to raise output at a slower pace than earlier this year. At 03:25 ET, Brent futures increased 1.7% to $66.59 a barrel, while U.S. West Texas Intermediate futures rose 1.7% to $62.92 a barrel.
OPEC+ plans to increase production by 137,000 barrels per day in October, significantly lower than the 555,000 bpd and 411,000 bpd increases implemented in previous months. The latest decision follows gradual production increases earlier this year, led by Saudi Arabia’s efforts to regain market share amid declining oil prices.
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