Rate cut expectations outshone job data and geopolitical uncertainty, pushing stock markets higher worldwide.

At a Glance

• Global markets rallied as investors priced in a potential U.S. interest rate cut.
• Yen weakened and Nikkei rose after Japanese prime minister’s resignation.
• ECB and PBOC extended a €45 billion renminbi swap line to 2028.
• China’s August exports slowed to six-month low, while EV sales decelerated.

Global Markets Brace for Fed Cuts

Markets turned bullish on bets that weak U.S. labor data will force the Federal Reserve’s hand. Futures point to a rate cut in September. Equity and bond markets responded, with stocks climbing and yields stable to lower.

Japanese Prime Minister Shigeru Ishiba’s surprise resignation further roiled sentiment. The yen slid, Nikkei surged, and markets anticipate softer monetary policy from the Bank of Japan.

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Liquidity Safety Net Deepens

The ECB and China’s central bank extended their currency swap agreement through October 2028. This keeps in place a €45 billion and 350 billion CNY line to underpin financial stability in euro-area banks.

Officials stressed the swap deal ensures banks can access renminbi funding if credit strains emerge. It signals Beijing’s intent to strengthen ties with the eurozone.

China’s Growth Challenges Take Center Stage

China’s export growth dipped to a six-month low of 4.4% in August, dragged by fading U.S. tariff truce benefits. However, demand from Southeast Asia provided some offset.

Sales of electric vehicles and hybrids cooled sharply, registering 7.5% year-over-year growth—the slowest pace in 18 months. The dip raises questions on consumer appetite and subsidy impact.

Additionally, China’s aggressive oil stockpiling—at about 530,000 barrels per day—has significantly absorbed excess global supply, easing downward pressure on crude prices.

Sources

Reuters
Associated Press
Economic Times