U.S. stock index futures edged higher on Monday, recovering slightly from Wall Street’s lower close in the previous session amid hopes that the Federal Reserve could respond to dreary labor market numbers by lowering borrowing costs soon.
After Friday’s worrying nonfarm payrolls report confirming a weakening U.S. job market, traders firmed their expectations for a 25-basis-point cut. The bets now stand at 90 per cent, according to CME Group’s FedWatch tool.
A jumbo 50-bps cut was also on the cards, compared to no such expectation before the jobs data was released.
Wall Street’s main indexes closed lower on Friday, however, as the numbers stoked fears of a potential slowdown in the world’s biggest economy.
Numerous brokerages have revised calls for Fed interest-rate cuts. Barclays now anticipates three cuts of 25 bps each in 2025 compared with two earlier, while Standard Chartered expects a 50-bps trim in September – double its earlier projection of a 25-bps reduction.
At 07:00 a.m. ET, Dow E-minis rose 68 points, or 0.14 per cent, S&P 500 E-minis added 14.5 points, or 0.22 per cent, and Nasdaq 100 E-minis gained 84.75 points, or 0.36 per cent.
Inflation data will be on investors’ radar this week to gauge the impact of President Donald Trump’s tariff policies on the U.S. economy, and whether it could strengthen the case for a bigger rate cut.
“The Fed’s wait-and-see stance on inflation amid tariff disruptions made sense as it was hard to paint a rosy picture for the economy in such conditions,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“But if inflation doesn’t pick up – which is highly surprising – then they’ll have to lower rates to avoid political and public backlash.”
A preliminary reading of the University of Michigan’s sentiment survey and a revision to the Bureau of Labor Statistics’ payrolls benchmark are also due this week.
With the Fed now entering a “blackout” period that bars public statements in the run-up to its September 16-17 meeting, markets will have to interpret economic data without fresh guidance from policymakers.
The S&P and the Nasdaq hit record highs on Friday, logging gains last week in a positive start to a historically dour September.
The benchmark S&P 500 has lost 1.5 per cent on average in the month – its worst month since 2000 – data compiled by LSEG shows.
Among stocks, retail trading platform Robinhood Markets and marketing platform AppLovin gained 7.5 per cent and 7.6 per cent, respectively, in premarket trading. The companies are set to join the S&P 500, effective September 22, after being snubbed during the last rebalancing.
Hecla Mining climbed 4.2 per cent on news of its forthcoming addition to the small-cap S&P 600 index.
Drug developer Summit Therapeutics slid 23.2 per cent after reporting mixed data for its lung cancer drug. (
Stocks rose and Treasury yields held lower on Monday after last week’s dismal U.S. labour data sealed the case for an interest rate cut this month, with investors preparing for a week heavy on politics, crucial data and central bank activity.
European and Asian shares were up 0.2 per cent and 0.7 per cent, respectively.
The first political drama of the week took place in Japan, where the yen and longer-dated bonds fell and stocks rose following the resignation of Prime Minister Shigeru Ishiba, as traders bet heightened political uncertainty would make the Bank of Japan less likely to raise rates in the near term.
Attention is turning to who will replace Ishiba, and whether it could be an advocate of looser fiscal and monetary policy such as Liberal Democratic Party veteran Sanae Takaichi, who has criticised the BOJ’s interest rate hikes.
Meanwhile, France could be forced to look for its fifth prime minister in three years as the incumbent Francois Bayrou faces a confidence vote on Monday that he is expected to lose.
The selloff in French assets after Bayrou called the vote last month has eased, and French stocks and bonds were slightly outperforming European peers on Monday.
But uncertainty about whether President Emmanuel Macron would try to appoint another prime minister or call fresh parliamentary elections if Bayrou loses means French and wider European assets are not yet out of the woods.
A slew of upcoming French debt rating reviews are also on investors’ radar.
The political uncertainty in France and Japan is also keeping the dollar in check – even after last Friday’s soft jobs data, which has left markets fully pricing in a 25 basis point rate cut from the Fed later this month, and showing a small chance of a 50 basis point cut.
The numbers raise “the question as to whether US employment conditions are now shifting from cooling to deteriorating and if the Fed should cut rates faster,” said Paul Mackel, global head of FX research at HSBC.
He said this had “opened the door” for the dollar to weaken again, but with “political noise around the yen and euro, the likelihood of dollar weakness will be reflected more easily against other currencies”.
The dollar hit a six-week low against a basket of currencies on Friday after the jobs data.
On Monday, while it was down markedly on the Swiss franc, and Antipodean currencies, the euro was just 0.1 per cent higher at $1.1731 and the dollar was even a touch higher on the yen at 147.6 yen.
U.S. Treasury yields dropped sharply on Friday but were last steadier, with the benchmark 10-year yield marginally softer on the day at 4.08 per cent and the rate sensitive two-year yield at 3.50 per cent.
U.S. CPI data due on Wednesday will be the last major data point before the Fed’s meeting, and a hot print could temper bets on a super-sized rate cut.
The European Central Bank meets on Thursday, but is expected to hold rates steady for a second straight meeting.
In commodities, gold continued to surge, hitting its latest all time high of 3,616 an ounce. The precious metal is up 37 per cent this year after rising 27 per cent in 2024.
Oil prices climbed after the OPEC+ group agreed over the weekend to raise output at a slower pace from October on expectations of weaker global demand. Brent crude and U.S. West Texas Intermediate crude rose 1.6 per cent each.
Reuters
