2025-09-08 19:33

Yen falls on political uncertainty in Japan French parliament votes to oust prime minister Investors pricing in slight chance of outsized September Fed cut NEW YORK, Sept 8 (Reuters) - The dollar extended its decline on Monday in the wake of Friday's weak U.S. jobs report, which all but cemented an interest rate cut this month, even as the yen fell after Japanese Prime Minister Shigeru Ishiba announced his resignation over the weekend. In Europe, the euro showed little reaction to news that France's parliament voted to oust Prime Minister Francois Bayrou on Monday. The parliament brought down the government over its plans to tame the ballooning national debt, plunging the euro zone's second-largest economy deeper into political crisis. Sign up here. Europe's common currency was last up 0.2% on the day versus the dollar at $1.1751 . Analysts said the outcome of the vote had been expected. In Japan, Ishiba on Sunday said he would step down, ushering in a potentially lengthy period of policy uncertainty for the world's fourth-largest economy, the most heavily indebted industrialised nation. That pushed the yen lower across the board and by mid-morning trading the dollar was up just 0.2% against the Japanese currency at 147.695 , after rising by as much as 0.8% on the day. But the market's attention remained firmly pinned on the U.S. dollar after a non-farm payrolls shock on Friday which reinforced expectations that the Federal Reserve will resume cutting interest rates at a policy meeting later this month. "The driving force in the foreign exchange market remains the dollar and U.S. developments," said Marc Chandler, chief market strategist at Bannockburn Forex in New York. "People can talk about Japanese politics, but the real driver of dollar/yen is not Japanese politics, or Japanese interest rates. It's U.S. interest rates, and with the market pricing in about a 10% chance of a 50 basis-point cut, the dollar is falling." Fed funds futures are pricing in a 90% chance of a standard 25 basis-point cut this month and a 10% chance of 50-bp rate decline, according to LSEG estimates. The nonfarm payrolls report showed U.S. job growth plunged in August and the unemployment rate increased to nearly a four-year high of 4.3%. The dollar index edged down 0.4% to 97.51, having slipped more than 0.5% on Friday. Against the Swiss franc, the dollar fell to its lowest since July 24, and was last down 0.5% at 0.7937 . UPTICK IN THE DOLLAR? "We feel there's a chance for a surprise uptick in the dollar especially if the inflationary figures to arrive in the form of PPI (producer price index) and CPI (consumer price index) paint a picture in which prices are just simply getting out of control," said Juan Perez, director of trading at Monex USA in Washington. In other currency pairs, the yen slid against the euro, falling to its lowest in more than a year . The euro was last up 0.4% at 173.40 yen. Investors are also focused on the possibility that Japan's Ishiba could be replaced by an advocate of looser fiscal and monetary policy, such as Liberal Democratic Party veteran Sanae Takaichi, who has criticised the Bank of Japan's interest rate hikes. Japanese stocks earlier surged while government bonds (JGBs) were steady, although yields on super-long JGBs hovered near record highs. The yen hardly reacted to data on Monday showing Japan's economy expanded much faster than initially estimated in the second quarter. Elsewhere, sterling edged up 0.3% against the dollar to $1.3545, having risen more than 0.5% on Friday. The Australian and New Zealand dollars rose 0.5% to US$0.6590 and 0.8% to US$0.5938, respectively. Also last Friday, U.S. Treasury Secretary Scott Bessent called for renewed scrutiny of the Fed, including its power to set interest rates, as the Trump administration intensifies its efforts to exert control over the central bank. President Donald Trump is considering three finalists to replace Fed Chair Jerome Powell, whom he has criticised all year for not cutting rates as he has demanded. https://www.reuters.com/world/middle-east/us-dollar-falters-rate-outlook-yen-retreats-amid-japan-uncertainty-2025-09-07/

2025-09-08 19:15

Government fall kills 44 billion euro deficit cut plan France now pays more to borrow than Greece, Spain Political chaos chills business and consumer spending PARIS/LONDON, Sept 9 (Reuters) - The collapse of France's latest government leaves the euro zone's second-biggest economy lurching deeper into a morass of feeble growth, high borrowing costs and a debt burden becoming one of Europe's heftiest. Lawmakers' rejection of Prime Minister Francois Bayrou's government in a no-confidence vote on Monday crushed any hope of making serious headway next year on France's budget deficit - the biggest in the euro zone. Sign up here. Opposition parties toppled the veteran centrist over his plans for a 44 billion euro ($52 billion) budget squeeze that will now inevitably be heavily watered down by whomever President Emmanuel Macron taps as his successor. "There is no upside scenario, there is no way out, there is no credible scenario where you end up with the same amount of fiscal consolidation," said Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management. Finance Minister Eric Lombard has acknowledged the next government, which must draft a 2026 budget by October 7, would be less ambitious than Bayrou, a longtime debt hawk. Bayrou's successor is also likely to rely more heavily on taxes than spending cuts to reduce the budget deficit with the Socialists - from whose ranks the next prime minister could come - calling for a 15 billion euro tax hike on the ultra-wealthy. But financial markets may frown on tax increases, especially broader measures, fearful they may choke off growth - already a worry in Britain. "What we're increasingly seeing is a reluctance of market participants to buy the taxation route as a viable way to reduce big fiscal deficits," said Russel Matthews, portfolio manager at RBC BlueBay Asset Management, which is betting against French bonds. "It's just becoming less credible," he said. French government bonds and stocks responded modestly on Tuesday to the government's collapse, which had been widely expected. DEBT TRAP Macron is not currently signalling plans to call a snap legislative election, and polls indicate doing so would not necessarily give a majority to any one party and break the deadlock. With France's politics in chaos and its public finances adrift, households and businesses are already hesitant to spend or invest. "Retail customers are like companies. The more visibility you have, the more you are able to invest and spend money for the future," automaker Renault's Chief Growth Officer Fabrice Cambolive told Reuters. Slow growth is particularly problematic for a high-debt country like France, because it cannot simply count on growing its way out from under its debt burden, which reached 3.3 trillion euros in June or 114% of GDP. That's lower than Greece's 153% or Italy's 138%. But, unlike France, both countries run considerable budget surpluses before taking interest payments into account. French debt payments are set to reach more than 100 billion euros by 2029 - up from 59 billion in 2024 - becoming the single biggest budget expense if growth slows or deficit reduction is relaxed, the Cour des Comptes audit office warned earlier this year. Meanwhile, Germany's plans to invest billions of euros in Europe's biggest economy after years of restraint also leaves France in an unflattering light. "The situation is improving everywhere except in France, which has become somewhat of an ugly duckling," said Oxford Economics economist Leo Barincou. With perennially slow growth and huge debt, Italy had long been Europe's problem child for financial markets, but "now France is clearly becoming that country," he added. MARKET SCRUTINY France's bond market, the biggest in the euro zone, was once considered among the main safe alternatives for investors looking beyond Germany. But since a snap legislative election delivered a hung parliament last year, France has been left paying a higher risk premium on its debt. . France, which faces a credit rating decision from Fitch on Friday, now pays more for longer-term debt than Greece and Spain, countries at the heart of the bloc's 2011 debt crisis. Its benchmark 10-year borrowing cost was on the cusp of rising above Italy's on Tuesday. At the start of 2024, Italian 10-year borrowing costs had been more than a whole percentage point higher than France's. Economist Mathieu Plane at the OFCE think-tank said the biggest risk was that France would have to durably pay a high risk premium amid political deadlock. "Then few decisions will be made about the long-term, on innovation, education, everything that can make future growth," he said. ($1 = 0.8527 euros) https://www.reuters.com/world/europe/crisis-prone-france-sinks-deeper-into-debt-quagmire-2025-09-09/

2025-09-08 18:11

LONDON, Sept 8 (Reuters) - French Prime Minister Francois Bayrou lost a confidence vote on Monday, plunging the euro zone's second largest economy deeper into political crisis. The euro showed little initial reaction, showing a 0.2% daily rise to trade at $1.1743, down from an earlier high of $1.1756 , while French bond and stock futures , both held onto the day's gains, up 0.3% and 0.6%, respectively. Sign up here. Financial markets had anticipated the no confidence vote would fail, while French markets face another test on Friday when Fitch Ratings reviews its AA- French rating with a negative outlook. COMMENTS: JUAN PEREZ, DIRECTOR OF TRADING, MONEX USA, WASHINGTON: "There was very little reaction to the French vote and the resignation of the prime minister because it was desired and expected. Truth is that guy needed to go and markets are happy that it brings potential new contention within the country for leadership. Bonds moving a little but FX-wise this had no impact since it was not a surprise." CHRIS SCICLUNA, HEAD OF ECONOMIC RESEARCH, DAIWA CAPITAL MARKETS, LONDON: "We've entered a period of uncertainty. The outcome was as expected, so markets should react in a modest way." "Macron now has his work cut out, trying to find a prime minister who can get enough support to pass a budget in parliament. "Over the near-term, I'm sure everyone in markets expects paralysis and downward pressure on ratings. The French deficit is going to remain big for the foreseeable future and how much (bond yield) spreads widen from here is open to question." TOM ROSS, HEAD OF HIGH YIELD, JANUS HENDERSON INVESTORS, LONDON: "This is not the last time we are going to be talking about budget deficits and fiscal spending and quite how governments deal with this." "This is one of the most prominent areas of how this has tried to come through in terms of impacting markets. The market hasn’t taken a huge amount of note ." "Europe had potentially this open goal, but then you have government and political situations like this that give investors pause for thought in terms of how they are going to execute on that." SIMON EDELSTEN, FUND MANAGER AT GOSHAWK ASSET MANAGEMENT, LONDON: "The bond markets seem to have anticipated this and longer-dated French bonds may continue at current high yields, as strong fiscal measures seem politically impossible. However, such issues are widely spread across Europe, (with) the UK chancellor also facing problems producing a credible budget in November. All this is against a background of U.S. bond yields rising - though in a different environment of tax cuts, but a feeble-seeming economy. The French budget situation continues to be the worst of the larger problems - but Europe has a range of social care costs, which seem destined to rise ahead of likely tax receipts. As debt service costs also are rising, the road before a crisis becomes shorter. However, politicians still see grasping this nettle as electoral suicide." MICHAËL NIZARD, HEAD OF MULTI ASSET AND OVERLAY, EDMOND DE ROTHSCHILD ASSET MANAGEMENT, PARIS: "Whichever outcome of the current political crisis, the probability of a significant public finances reform will remain low, so much so that financial markets themselves seem resigned and might settle for a scenario where the budget deficit does not deteriorate further. Yet, without being catastrophic, the situation is worrisome as France diverges from the rest of the euro zone, with the largest budget deficit (-5.8% in 2024; -5.4% expected in 2025 versus a euro zone average around -3%) and public debt on an upward trajectory (113% in 2024 and 117% expected in 2025)." (This story has been refiled to clarify that the vote is a 'confidence' vote, not a 'no-confidence' vote, in the headline) https://www.reuters.com/world/europe/view-french-government-loses-no-confidence-vote-parliament-2025-09-08/

2025-09-08 16:36

LONDON, Sept 8 (Reuters) - British hedge fund Marshall Wace posted positive returns in two of its funds in August, a source close to the matter told Reuters on Monday. Co-founded by British financier Paul Marshall, the firm which manages over $70 billion in assets, returned 0.41% in its Eureka Fund last month and this brought performance to a positive 6.49% for the year to end-August, the source said. Sign up here. The hedge fund's Market Neutral Tops fund returned 1.95% for August and is up 13.15% for the year to date, the source added. Systematic stock trading hedge funds, such as Marshall Wace, are up over 12% for 2025 so far, said Goldman Sachs in a note to clients this week. https://www.reuters.com/markets/europe/marshall-wace-posts-positive-performance-two-funds-says-source-2025-09-08/

2025-09-08 16:30

BRASILIA, Sept 8 (Reuters) - Brazilian President Luiz Inacio Lula da Silva said on Monday that more trade and financial integration among the BRICS group of developing nations would help mitigate the effects of protectionism. "Tariff blackmail is being normalized as a tool for conquering markets and interfering in domestic issues," Lula said in the government's published remarks of a Monday virtual meeting of BRICS leaders, without directly citing the United States. Sign up here. BRICS countries have become "victims of unjustified and illegal trade practices," Lula said. BRICS members Brazil and India are among the countries hardest hit by U.S. President Donald Trump's tariffs, while new sanctions against Russia over the war in Ukraine are expected. "Increasing barriers and complicating transactions will not help. Neither would the linking of trade measures to non-trade matters," India's Prime Minister Narendra Modi said, according to a speech shared by India's Foreign Ministry. Lula told Reuters in an interview last month he would raise the issue of Trump's tariffs with BRICS. The 50% levies on most Brazilian exports are linked to what Trump has described as a "witch hunt" against his ally and former Brazilian President Jair Bolsonaro, who is on trial for allegedly plotting a coup. U.S. tariffs on Indian goods were doubled last month to as high as 50% in response to India's continued imports of Russian oil. "Certain countries have launched trade wars and tariff wars, severely impacting the world economy and seriously undermining international trade rules," Chinese leader Xi Jinping said during the meeting, according to China's state-run news agency Xinhua. The virtual meeting, which lasted 1-1/2 hours, brought together leaders from Brazil, Russia, India, China, South Africa, Egypt, Indonesia, Iran, the United Arab Emirates, and Ethiopia, Brazil's government said in a separate statement. The group discussed the risks posed by the resurgence of unilateral measures, particularly in international trade, and explored ways to strengthen mechanisms for solidarity, coordination, and trade among BRICS nations, the statement said. https://www.reuters.com/world/china/brazils-lula-calls-tighter-trade-ties-brics-tariffs-bite-2025-09-08/

2025-09-08 12:25

Yen falls on political uncertainty in Japan French politics also in focus Investors pricing in slight chance of outsized September Fed cut SINGAPORE/LONDON, Sept 8 (Reuters) - The yen eased on Monday after Japanese Prime Minister Shigeru Ishiba announced his resignation over the weekend, while the dollar was on shaky ground as Friday's weak U.S. jobs report cemented expectations of a Federal Reserve rate cut this month. The focus for markets will also be on French Prime Minister Francois Bayrou's confidence vote later in the day, which he is expected to lose. The announcement of the vote, which Bayrou himself called, has plunged the euro zone's second-largest economy deeper into political crisis. Sign up here. Japan's Ishiba on Sunday said he would step down, ushering in a potentially lengthy period of policy uncertainty for the world's fourth-largest economy, the most heavily indebted industrialised nation. The yen weakened sharply in Asia trade, leaving the dollar up by as much as 0.78% at one point before steadying to trade with a 0.26% gain on the day at 147.77 . The Japanese currency similarly slid to its lowest in more than a year against the euro , which rose 0.3% on the day to 173.25 yen. Investors are focusing on the chance of Ishiba being replaced by an advocate of looser fiscal and monetary policy, such as Liberal Democratic Party veteran Sanae Takaichi, who has criticised the Bank of Japan's interest rate hikes. "The probability of an additional rate hike in September was never seen as high to begin with, and September is likely to be a wait-and-see," Hirofumi Suzuki, chief currency strategist at SMBC, said of the BOJ's next move. "From October onwards, however, outcomes will in part depend on the next prime minister, so the situation should remain live." Japanese stocks surged while government bonds (JGBs) were steady, though yields on super-long JGBs hovered near record highs. "With the LDP lacking a clear majority, investors will be cautious until a successor is confirmed, keeping volatility elevated across yen, bonds and equities," said Charu Chanana, chief investment strategist at Saxo. "Near term, that argues for a softer yen, higher JGB term-premium, and two-way equities until the successor's profile is clear." The yen hardly reacted to data on Monday showing Japan's economy expanded much faster than initially estimated in the second quarter. SEPTEMBER FED CUT BAKED IN The dollar struggled to recoup its heavy losses after falling sharply on Friday on data that showed further cracks in the U.S. labour market. The nonfarm payrolls report showed U.S. job growth plunged in August and the unemployment rate increased to nearly a four-year high of 4.3%. Investors ramped up bets of an outsized 50-basis-point rate cut from the Fed later this month following the release and are now pricing in a 10% chance of such a move, as compared to none a week ago, according to the CME FedWatch tool. Sterling edged up 0.1% to $1.3534, having risen more than 0.5% on Friday, while the euro steadied at $1.1725, after hitting a more than one-month high on Friday. The dollar index edged down 0.2% to 97.7, having tumbled more than 0.5% on Friday. "(The payrolls report) has resulted in the dollar index falling back below support at the 98.000-level although the negative impact on the U.S. dollar is more modest than implied by the drop in short-term U.S. yields," MUFG currency strategist Lee Hardman said in a note on Monday. "The weak nonfarm payrolls report for August has reinforced expectations that the Fed will resume cutting rates this month, and has even encouraged expectations that they could begin with a larger 50-bp rate cut similar to last September." U.S. Treasury Secretary Scott Bessent on Friday called for renewed scrutiny of the Fed, including its power to set interest rates, as the Trump administration intensifies its efforts to exert control over the central bank. President Donald Trump is considering three finalists to replace Fed Chair Jerome Powell, whom he has criticised all year for not cutting rates as he has demanded. Elsewhere, the Australian and New Zealand dollars each rose 0.5% to $0.6585 and $0.5926, respectively. https://www.reuters.com/world/middle-east/yen-dented-political-uncertainty-grips-japan-dollar-fragile-2025-09-07/