Dow Jones & Nasdaq 100 Advance Despite China Export Slump; Rate Cut Bets Boost Sentiment

Key Asian Market Movers: Yen Dives on Ishiba Resignation, Boosting the Nikkei

Japanese Prime Minister Ishiba resigned on Sunday, triggering a USD/JPY breakout and a Nikkei 225 rally on Monday. The Nikkei 225 rallied 1.44% to 43,639, while USD/JPY rose 0.57% to 148.184 in morning trading on September 8.

The resignation of Prime Minister Shigeru Ishiba fueled political uncertainty, weighing on demand for the Japanese yen. A weaker yen could boost overseas demand for Japanese goods, lift earnings, and drive share prices higher.

Political developments overshadowed upbeat economic data. Japanese GDP numbers signaled a sharper pickup in economic momentum in the second quarter. The economy expanded 0.5% quarter-on-quarter (QoQ), up from a preliminary 0.3%. Private consumption rose 0.4% QoQ (prelim: 0.2%) after stalling in the previous quarter. Notably, private consumption trends suggest that wage growth translated into spending, raising bets on a Q4 Bank of Japan rate hike.

While Japan’s GDP data and political news headlines influenced the Nikkei, China’s trade data affected broader market sentiment.

China Exports Slow, Challenging Beijing’s 5% GDP Growth Target

Chinese exports increased 4.4% year-on-year in August, down sharply from 7.2% in July. Import growth also slowed, rising only 1.3% (July: 4.1%). August’s exports weakened as the effects of pre-tariff front-loading wore off, exposing Chinese shipments to US tariffs.

The Hang Seng Index gained 0.35% in morning trading, while Mainland China’s Shanghai Composite Index rose 0.17%. Markets recovered from a pullback on the weaker data amid speculation about further stimulus support from Beijing. The absence of fresh policy measures may challenge Beijing’s 5% GDP growth target.

The Standing Committee of the National People’s Congress will be under the spotlight this week.

Meanwhile, risk-on sentiment dampened demand for gold, which slipped 0.08% to $3,583.

US Stock Futures Advance Ahead of US CPI Report

Beyond Asia, US stock futures steadied after Friday’s losses. The Nasdaq 100 E-mini rose 66 points, the S&P 500 E-mini gained 9 points, while the Dow Jones E-mini advanced 38 points.

Market concerns about the US economy losing momentum shifted in the morning session. August’s weaker-than-expected US Jobs Report cemented bets on a September Fed rate cut and fueled expectations of further easing in the fourth quarter. Lower interest rates would reduce borrowing costs, boosting company earnings and lifting share prices.

According to the CME FedWatch Tool, the chances of a September Fed rate cut stood at 100% (August 29: 86.4%). Furthermore, the probability of a 25-basis point rate cut in October rose from 48% (August 29) to 71.6%.

Sentiment toward the Fed rate path limited the effect of weak Chinese exports on US stock futures.

Outlook: Consumer Inflation Expectations in Focus

Later today, US consumer inflation expectation figures will face scrutiny ahead of the highly anticipated CPI Report. Economists expect inflation expectations to remain at 3.1% in August, well below April’s 3.6% high.

A lower reading could support a more dovish Fed rate path. Consumers may delay spending if they expect prices to drop, dampening demand-driven inflation. Under this scenario, US stock futures may extend their gains.

On the other hand, a higher print could temper bets on policy easing in Q4, weighing on risk assets.

Looking ahead, August’s US CPI Report (September 11) will be the next key data release. The Fed has signaled increased concern about the labor market, fanning expectations of multiple Fed rate cuts. However, hotter inflation alongside weaker jobs growth could stoke stagflation fears, affecting demand for risk assets.

E-mini Futures: Technical Levels to Watch

Monday morning’s gains affirmed the short-term bullish bias. However, bullish momentum hinges on key US economic data and the Fed’s policy guidance. For traders, here are the key levels that could determine market direction in the coming sessions.

Dow Jones

• Resistance: August 22 high of 45,841, 46,000, then 46,500.
• Support: 45,000, then the 50-day EMA (44,647).

Nasdaq 100

• Resistance: August 18 high of 23,882, 24,000, then 24,500.
• Support: The 50-day EMA (23,168), and then 23,000.

S&P 500

• Resistance: September 5 high of 6,542 and then 6,750.
• Support: 6,400 and then the 50-day EMA (6,353).

With US inflation and the Fed’s monetary policy decision looming, traders brace for the next two weeks of key events that could determine whether September remains the market’s toughest month. Follow our live coverage and consult our economic calendar.