Closing Recap

U.S. stock futures indicate a higher open as markets digest a weekend of significant political change in Japan and ongoing U.S. government shutdown drama; the Japanese Yen plunged after a pro-stimulus candidate won the LDP leadership race, while gold is hitting new all-time highs and oil is firm. In the currency markets, the Japanese Yen gapped sharply lower across the board after pro-stimulus candidate Sanae Takaichi won the LDP leadership race, signaling a continuation of “Abenomics”-style policies, while the U.S. dollar firmed slightly despite shutdown concerns. 

Key Takeaways 

• Futures Point Higher Amid Geopolitical Shifts: Equities are set to open in the green, with the S&P 500 up +0.8%, as markets react to major political developments in Japan and digest the ongoing U.S. government shutdown.
• “Abenomics 2.0” as Takaichi Wins in Japan: Pro-stimulus candidate Sanae Takaichi’s victory in Japan’s LDP leadership race has sent the Nikkei soaring to a record high and the Yen tumbling, as markets price in more fiscal easing and delayed BOJ rate hikes. 
• Government Shutdown Enters Second Week: The U.S. government shutdown continues, delaying key economic data releases like the NFP report and increasing reliance on private-sector data and Fedspeak. 
• Gold Surges to New All-Time Highs: Gold prices are up strongly, with spot gold breaking above $3,900/oz, driven by safe-haven demand from the shutdown and expectations of a prolonged Fed easing cycle. 
• The Japanese Yen plunged, with USD/JPY gapping up over 200 pips to above 150, as markets reacted to the election of a fiscally dovish Prime Minister, while the U.S. dollar firmed against other majors. 
• Bitcoin surged to a new all-time high above $125,000 over the weekend, driven by strong ETF inflows and the “debasement trade” narrative amid U.S. fiscal stress. 
• Oil Prices Firm: Crude oil prices are higher as a modest OPEC+ production hike is seen as insufficient to offset ongoing geopolitical risks and potential demand resilience. 
• Quiet Day for Data, Focus on Fed: The economic calendar is bare today, keeping the focus on central bank policy, with the market pricing in a 96% chance of a Fed cut in October.

Market Overview

The new week has been defined by a single, powerful political development out of Japan. U.S. equity markets are poised for a strong start to the week, with futures pointing to solid gains as investors react to a significant political shift in Japan and largely shrug off the continuation of the U.S. government shutdown. Over the weekend, Sanae Takaichi, a staunch proponent of “Abenomics”-style fiscal stimulus, won the leadership race for Japan’s ruling LDP party, setting her up to become the country’s first female Prime Minister. The market reaction was immediate and dramatic: the Japanese Nikkei 225 soared to a new record high, and the Japanese Yen plunged across the board (USD/JPY gapped up over 200 pips) to trade above 150.00 as traders priced in a new era of fiscal expansion and a delay in any potential Bank of Japan rate hikes. The Nikkei 225 surged nearly 5% to a new record high on the news, as the promise of renewed stimulus electrified equity bulls.

Index	Last	Change	% Change
S&P 500	6715.79	0.44	0.0001
Nasdaq	22780.51	-63.54	-0.0028
Dow Jones	46758.28	238.56	0.0051
JP:NIK	47,944.76	2,175.26	4.75%

This pro-stimulus development in the world’s fourth-largest economy is providing a positive tailwind for global risk assets, helping to offset concerns about the ongoing U.S. government shutdown. The shutdown is now entering its second week, and while its direct economic impact is seen as minimal for now, it is causing significant operational disruptions, most notably the delay of key economic data releases, including last Friday’s Nonfarm Payrolls report. This information vacuum is increasing the market’s reliance on private-sector data and commentary from Federal Reserve officials. 

Despite the data delays, the market remains highly confident in the Fed’s dovish path, with Fed funds futures indicating a 96% probability of another 25-basis-point rate cut at the end of this month. This expectation, combined with the positive news from Japan, is fueling a risk-on mood. Safe-haven assets are also seeing strong bids, with gold surging to yet another new all-time high.

Economic Calendar

The market continues to operate in an information vacuum as the U.S. government shutdown prevents the release of official economic data. There were no major economic releases during the Asian session. The key focus remains on political developments and their implications for central bank policy.

• Today’s Major U.S. Releases: NO U.S. DATA due to government shutdown. 
• Heavy Slate of ECB Speakers: de Guindos, Lane, Lagarde. 
• BoE Governor Bailey Speaks (17:30 GMT). 
• Fed’s Schmid Speaks (21:00 GMT).

Key risk events this week: 

• U.S. Government Shutdown ongoing. 
• RBNZ Monetary Policy Announcement (Wednesday). 
• Canadian Labor Market Data (Friday). 
• Speeches from numerous Fed and ECB officials. 

Commodities, Treasuries and Currencies 

Gold prices are surging to new all-time highs, with the December futures contract gaining $51.20 (+1.31%) to settle at $3,960.10 per ounce. The rally is a direct response to the U.S. government shutdown and expectations of a prolonged Fed easing cycle. Crude oil prices are modestly higher, with WTI gaining 1.23% to $61.63/bbl, as the market digests a modest 137,000 bpd production hike from OPEC+ for November, which is seen as insufficient to offset ongoing geopolitical risks. 

Asset	Change	Unit	Last
WTI Crude	0.75	USD/bbl	61.63
Gold	51.2	USD/oz	3960.1
EUR/USD	-0.0077	USD	1.1667
USD/JPY	2.7	JPY	150.15
US 10-Yr Yield	+3.3 bps	%	0.04154

The currency market has been completely reshaped by the political news out of Japan, creating clear and powerful trends to start the week. 

• USD/JPY & Yen Crosses: The election of Sanae Takaichi is a paradigm shift for the Yen. With the prospect of a BoJ hike now remote and a return to aggressive fiscal stimulus expected, the path of least resistance is for sustained Yen weakness. USD/JPY gapped over 200 pips and is now trading above the critical 150.00 psychological level. Every significant dip in Yen pairs is now viewed by many as a long-term buying opportunity. 
• EUR/USD: The pair is on shaky ground, trading below 1.1700. The broad U.S. Dollar strength, driven by the Yen’s collapse, is a major headwind. The Euro is also facing its own internal pressures from political uncertainty in France and sluggish regional growth data. Large options expiries today at 1.1700 ($1.4B) and 1.1750 ($2.3B) are likely to act as bookends, containing price action.
• GBP/USD: Sterling has opened the week with a bearish gap, trading below 1.3450. The pair is struggling against the tide of renewed dollar strength, though diminishing odds for further Bank of England rate cuts in 2025 could provide some underlying support.

U.S. Treasury yields are higher in early trading, with the 10-year yield up about 3 basis points to 4.154%, as the risk-on mood from Japan and a firmer dollar weigh on bond prices. Bitcoin surged to a new all-time high of $125,617 over the weekend, driven by strong ETF inflows and the “debasement trade” narrative amid U.S. fiscal stress, before pulling back slightly.

Looking Ahead 

The market will be driven by political headlines from both Japan and the U.S. The formation of Sanae Takaichi’s cabinet and her initial policy pronouncements will be critical for the Yen and Japanese markets. In the U.S., any signs of a breakthrough or further entrenchment in the government shutdown negotiations will be the primary focus. With official U.S. economic data on hold, commentary from the heavy slate of Fed and ECB speakers this week will take on even greater importance for guiding market expectations. The key driver in FX is the Yen’s weakness. Traders will be watching to see if USD/JPY can hold and build on its gains above the 150.00 level. This is now the market’s primary directional theme. 

Now entering its second week, the shutdown’s primary impact remains the data vacuum. Any headlines about potential “mass layoffs” of federal workers, as threatened by the White House, could inject a new wave of risk aversion into the market. With the shutdown paralyzing U.S. data, traders will look to other key events this week, including the RBNZ rate decision (Wednesday) and Canadian jobs data (Friday), for potential volatility outside of the main U.S. and Japan-centric themes.