U.S. stock futures moved slightly higher on Monday as investors weighed the potential for Federal Reserve interest rate cuts later this month. Key inflation figures scheduled for release this week are likely to influence market expectations, while political developments in France and Japan, alongside rising oil prices, are shaping sentiment.
Futures See Modest Gains
By early Monday morning, S&P 500 futures were up 0.2%, Nasdaq 100 futures rose 0.4%, and Dow Jones futures added 0.1%. Last week, U.S. equities fell after August’s nonfarm payroll report showed slower job growth and a rise in the unemployment rate, reinforcing the possibility of a Fed rate reduction. Analysts suggest at least a 25-basis-point cut is likely at the September 16-17 meeting, with a half-point reduction also under consideration.
Despite Friday’s pullback, the S&P 500 remains close to record highs. Market watchers note that September has historically been a challenging month for equities, and elevated valuations, uncertainty over U.S. trade policies, rising government bond yields, and concerns about the technology sector, particularly AI, continue to influence investor caution.
Inflation Report in Focus
Investors are now focused on Thursday’s U.S. consumer price index for August, expected to show a 2.9% year-on-year rise, up from 2.7% in July. This data will help determine the Fed’s next steps as it balances its mandate to support employment and maintain price stability. A rate cut could provide a boost to hiring and investment, but it may also increase inflationary pressures.
French Fiscal Vote Creates Uncertainty
In Europe, political developments may limit market gains. France is holding a confidence vote on Prime Minister François Bayrou’s fiscal plan on Monday. Should opposition parties reject the plan, Bayrou may need to resign. The government aims to reduce the deficit from 4.6% of GDP to 2.8% by 2029 through €43.8 billion in spending cuts and structural reforms. However, several proposals, including the reduction of public holidays, have faced resistance, contributing to heightened sovereign bond yields. French 30-year bond yields reached levels not seen since June 2009 last week.
Leadership Shift in Japan
Political instability also emerged in Japan over the weekend after Prime Minister Shigeru Ishiba announced his resignation as leader of the Liberal Democratic Party following heavy losses in the upper house elections. Ishiba’s exit comes after a U.S.-Japan trade deal that lowers tariffs on Japanese exports, but it opens the door to a leadership contest in the fourth-largest economy. The Japanese yen weakened against the U.S. dollar initially but recovered partially, while the Nikkei 225 rose and 10-year government bond yields stayed relatively flat.
Oil Prices Climb on OPEC+ Output Decision
Crude prices gained after OPEC+ announced a slower-than-expected increase in production. Brent futures rose 1.7% to $66.59 a barrel, while U.S. West Texas Intermediate futures gained 1.7% to $62.92 a barrel. The producer group plans a 137,000-barrel-per-day increase in October, substantially lower than the 555,000 and 411,000 bpd monthly hikes seen earlier this year. The move reflects Saudi Arabia’s continued efforts to stabilize prices and manage market share amid declining crude levels.
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