Markets Poised Ahead of Fed Data; Paris on Hold Amid Bayrou Saga

In the United States, markets are almost certain the Fed will cut rates next week. But several data releases in the coming days could reignite debate over whether such a move is justified. Meanwhile in Europe, Paris is once again in the spotlight-not for its markets, but for its politics. The possible fall of the Bayrou government has raised concerns about France's public debt and could trigger a wave of risk aversion across the region.

Wall Street remains fixated on the Federal Reserve. More than usual, in fact, as the White House has made the Fed the scapegoat for a weakening economy. Recent employment data confirmed a slowdown in demand while supply was already faltering. This has only reinforced expectations that the Fed will cut rates at next week’s policy meeting. Futures tracked by CME’s FedWatch tool now assign a 90% probability of a 25-basis-point cut and a 10% probability of a 50-basis-point cut. The benchmark rate currently stands in the 4.25–4.50% range. Investors will focus on three key data releases this week that could sharpen or blur those bets: the annual revision of job creation figures on Tuesday, producer prices on Wednesday, and, most importantly, August inflation on Thursday.

 

In Europe, politics takes center stage. France will be closely watched as Prime Minister François Bayrou— the fourth in three years— delivers his general policy statement, followed by debate and a confidence vote. The government’s survival looks unlikely given the tone of recent political statements. A collapse would immediately push France’s risk premium higher, translating into less favorable borrowing conditions and further straining already fragile public finances. Market doubts over the country’s budget path and debt trajectory would deepen, cementing a more negative perception of its creditworthiness.

 

Across the globe, Japan is also in flux. Prime Minister Shigeru Ishiba resigned over the weekend after losing his parliamentary majority. The yen slipped on the news, while Tokyo equities advanced on speculation that Sanae Takaichi—viewed as supportive of fiscal spending and opposed to further Bank of Japan rate hikes—could take power. Like in France and the U.S., the nexus of budgets and interest rates is shaping the outlook.

 

Markets closed last week with mixed performances. The Stoxx Europe 600 slipped 0.2%, while the S&P 500 gained 0.3% despite a weak Friday session. The standout asset was gold, which surged 4% to fresh record highs, a sign that not all investors are convinced by equity markets sitting at their own highs.

Here's what you need to know to start the week off right:

• OPEC+ has decided to raise production again, though at a more modest pace than in previous adjustments. Oil prices rebounded after earlier losses.
• Japanese Prime Minister Ishiba has announced his resignation.
• China’s August trade data disappointed, with both imports and exports falling—most notably shipments to the United States, which declined again.
• On the macro agenda, aside from the three U.S. indicators highlighted earlier, the European Central Bank will take center stage. The ECB is expected to leave rates unchanged at its meeting on Thursday.
• On the corporate agenda, the week looks relatively quiet, with Synopsys reporting Tuesday, Inditex on Wednesday, and Adobe later in the week.

In Asia-Pacific, equity markets are largely indifferent to stories of disposable prime ministers. The Nikkei 225 gained 1.5%, while China, Hong Kong, Taiwan, India, and South Korea posted slight gains. The Australian market was the exception that proves the rule, with the ASX closing down 0.3%.

Today's economic highlights:

German industrial production for July was the only major Western statistic today. See the full agenda here.

• Dollar index: 97,59
• Gold: $3,624
• Crude Oil (BRENT): $66.72 (WTI) $62.99
• United States 10 years: 4.064%
• BITCOIN: $111,000

In corporate news:

• Applovin gained about 7% in premarket trading as it is set to join the S&P 500 on September 22.
  
• Chevron is seeking to balance its refinery portfolio, said Brant Fish, president of international products at the American oil major, during an event in Singapore.
  
• Gold miners listed in the United States rose in premarket trading on Monday, supported by the increase in gold prices: Gold Fields rose 2.5%, Harmony Gold rose 2.8%, Anglogold Ashanti rose 1.9%.
  
• Robinhood gained more than 7% in premarket trading as the online trading platform is set to join the S&P 500 on September 22.
  
• Tesla’s U.S. market share fell in August to its lowest level in nearly eight years, according to data from research firm Cox Automotive shared exclusively with Reuters.
  
• Uber and Momenta, a Chinese autonomous driving technology company, announced on Monday that they plan to test level 4 autonomous vehicles in Germany next year.

Analyst Recommendations:

• AMD: HSBC maintains its Buy rating but lowers the price target from $200 to $185.
• Biomarin Pharmaceutical: HC Wainwright & Co initiates with a Neutral rating and a price target of $60.
• Boeing: Vertical Research Partners upgrades from Hold to Buy and raises the price target from $242 to $270.
• Broadcom: Argus Research Company maintains its Buy rating and raises the price target from $285 to $375.
• Celsius Holdings: Truist Securities maintains its Buy rating and raises the price target from $65 to $70.
• Chewy: Mizuho Securities upgrades from Neutral to Outperform and raises the price target from $44 to $50.
• ConocoPhillips: Raymond James maintains its Outperform rating but lowers the price target from $117 to $115.
• Constellation Energy: Jefferies maintains its Hold rating and raises the price target from $293 to $347.
• Darling Ingredients: TPH&Co. maintains its Buy rating but lowers the price target from $44 to $42.
• Deere & Company: Melius Research maintains its Buy rating but lowers the price target from $750 to $724.
• Extra Space Storage: Mizuho Securities maintains its Outperform rating and raises the price target from $153 to $154.
• Fox: Wells Fargo maintains its Overweight rating and raises the price target from $66 to $70.
• Hewlett Packard Enterprise: CITIC Securities maintains its Buy rating and raises the price target from $22 to $26.
• International Flavors & Fragrances: Wolfe Research upgrades from Underperform to Peer Perform.
• Kenvue: Evercore ISI maintains its In Line rating but lowers the price target from $25 to $23.
• Lamb Weston Holdings: BNP Paribas Exane maintains its Outperform rating and raises the price target from $62 to $64.
• Medpace Holdings: Deutsche Bank maintains its Hold rating and raises the price target from $430 to $445.
• Oracle: Barclays maintains its Overweight rating and raises the price target from $221 to $281.
• Public Storage: Mizuho Securities maintains its Neutral rating and raises the price target from $309 to $310.
• Ralph Lauren: Wells Fargo maintains its Overweight rating and raises the price target from $320 to $345.
• Salesforce.com: Citi maintains its Neutral rating and raises the price target from $275 to $276.
• SanDisk: Benchmark Co. maintains its Buy rating and raises the price target from $70 to $85.
• V.F. Corporation: Barclays maintains its Overweight rating and raises the price target from $16 to $19.