Easier fiscal policy and more government spending are, of course, not great news for Japanese bonds, which have already seen yields rise steadily since 2020. The 20-year JGB yield, near 0% five years ago, is now approaching 2.70% — it jumped 6bp this morning, while the 30-year yield surged 12bp, hitting multi-decade highs last seen in August.

On the currency front, the Japanese yen slipped on expectations of a softer Bank of Japan (BoJ) path — and possibly fewer rate hikes. The USDJPY soared past the 150 mark. In equities, the Nikkei jumped more than 4% to a fresh all-time high on optimism that looser fiscal and monetary policies, along with a weaker yen, will continue to support Japanese equities. Defence stocks, in particular, rallied strongly on speculation that the new government could increase military spending beyond previous expectations. Japan Steel Works, for instance, jumped nearly 14%.

It was, in short, a great start to the week for Japanese equities — and much less so for Japanese bonds. Note, however, that rising JGB yields can threaten global risk appetite by narrowing the risk premium between JGBs and other assets. Still, strong dovish Federal Reserve (Fed) expectations and ongoing AI enthusiasm should help maintain appetite for US equities, while European markets may continue to benefit from the positive echoes of the global AI rally and softer BoJ bets joining the dovish Fed narrative.

S&P 500 and Nasdaq futures are in the green as I write, with the Nasdaq supported by Hon Hai (Foxconn) — one of Nvidia’s key server production partners — which reported an 11% rise in quarterly sales.

Over the weekend, OPEC announced it will raise oil output by 137,000 barrels per day in November, following a similar increase in October. Since the move had already been priced in after a 7% selloff in US crude last week, oil prices rebounded nearly 2% in Asia, flirting with the $62 per barrel level. The bounce followed a break below the summer’s sideways trading range around $62, on expectations of this very production hike. The broader outlook, however, remains tilted to the downside, with a greater likelihood of prices slipping below $60 than climbing back above $65 per barrel.

Now, let’s turn to what hasn’t been announced. The US official jobs data was not released last Friday as the government remains shut, and the data scheduled for this week will also be delayed if the shutdown continues — a scenario currently given a 60%–80% chance. The US dollar is better bid this morning, mostly due to the sharp selloff in the yen, but fundamentally, none of the traditional currencies looks particularly appetizing.

The dollar faces headwinds from trade tensions, political uncertainty and debt concerns. Sterling remains hard to love amid fiscal and political risks ahead of the Autumn Budget. The yen, once a safe haven, is grappling with its own debt and political challenges, and the euro, while relatively stronger, remains clouded by French political turmoil, as the new government faces early no-confidence risks. Among traditional currencies, the Swiss franc remains the standout safe haven — though the Swiss National Bank (SNB) is showing its teeth to the bulls, warning it could sell francs to counter excessive appreciation.

As a result, assets without government ties — like gold and Bitcoin — are seeing renewed inflows. Gold rallied to a fresh record high this morning, trading around $3’945 per ounce, and is likely to test the $4’000 level soon. Some strategists, including those at Goldman Sachs, see it heading toward $5’000 per ounce. Silver rose to $48.50, with bulls eyeing a break above the $50 psychological mark, and Bitcoin briefly traded above $125’000 over the weekend. These assets are likely to continue trending higher, not least thanks to a broadly softer US dollar.

Zooming out from currencies, this week’s macro calendar is relatively light. China remains closed for the Golden Week holiday until Thursday. ECB President Lagarde and BoE Governor Bailey speak today. The Reserve Bank of New Zealand (RBNZ) is expected to announce a 25bp rate cut at its meeting on Wednesday, and the FOMC will release the minutes of its latest meeting a few hours later.

And yes — there’s still a slim chance that the US jobs report could be released on Friday, but I wouldn’t bet my shirt on it.

In the absence of key data, US investors will focus on Wednesday’s FOMC minutes for any hint of further dovishness, and on the start of the earnings season, which kicks off this week. Expectations are upbeat but still largely beatable. The S&P 500 is expected to deliver 6.3% revenue growth and nearly 8% profit growth in Q3, with technology earnings seen surging 21%, utilities and financials rising 17.5% and 11% respectively, while energy and consumer staples are expected to post around a 3% decline due to trade frictions and weaker energy prices.

The first earnings will land on Thursday, with Delta, Levi’s, and Pepsi, followed by BlackRock on Friday.