Markets Steady Despite Japanese Political Unrest; Tech Earnings and Central Banks in Focus
Global financial markets remained stable on Monday despite political uncertainty in Japan, where the ruling coalition lost control of the upper house in weekend elections. The yen strengthened slightly as investors dismissed the election loss as largely expected. Prime Minister Shigeru Ishiba pledged to stay in office, which helped contain market reactions. Meanwhile, traders turned their attention to key upcoming events, including earnings from major U.S. tech firms and the European Central Bank’s policy meeting.
European stock indices were mostly flat, with the STOXX 600 unchanged and the FTSE 100 rising 0.1%. The euro edged up, supported by expectations that the ECB will maintain its current interest rate. Japan’s market was closed for a holiday, but Nikkei futures gained slightly. Economists voiced concerns that the weakened Japanese government may face challenges in trade negotiations with the U.S., and noted that political instability could delay interest rate hikes by the Bank of Japan.
In the U.S., S&P 500 and Nasdaq futures ticked higher in anticipation of second-quarter earnings from major technology companies like Alphabet, Tesla, and IBM. Analysts believe these results could significantly influence market sentiment, especially after strong performances from the banking sector last week. Defense stocks also drew attention as global government spending continued to boost the aerospace and defense sector, pushing both U.S. and European defense shares to record levels.
The bond market saw yields drop slightly ahead of the ECB meeting and euro zone PMI data. Fed Governor Christopher Waller repeated his support for a rate cut, though most Fed officials, including Chair Jerome Powell, have advocated for a pause. Market expectations now lean toward a rate cut in September or October. Political tensions around the Fed’s independence remain a concern, with President Trump recently threatening—and then backing away from—removing Powell.
Commodities were mixed as gold rose 0.5% and platinum reached a multi-year high. Oil prices hovered near flat, caught between the possibility of increased OPEC+ supply and potential sanctions against Russian exports by the European Union. Brent crude rose just 0.1% to $69.32 per barrel. As the week unfolds, markets are expected to react to geopolitical developments, trade negotiations, and corporate earnings results across major sectors.
Source: Reuters