A look at the day ahead in European and global markets from Wayne Cole. So, something political markets actually like. Japan's first female Prime Minister Sanae Takaichi knocked it out of the park in the election, sparking a 4.5% rally in the Nikkei to all-time highs. Indeed, the index broke 55,000, 56,000 and 57,000 for the first time, all in one go. It was an emphatic win as the LDP took 316 of the 465 seats in parliament's lower house, its best-ever result. With coalition partner, the Japan Innovation Party, Takaichi controls 352 seats and a supermajority of two-thirds. That clears the way for more defence spending, tax cuts, corporate reform and generally reflationary policy, assuming Takaichi actually follows through on her election pledges. While equity investors were pleased, the prospect of all this spending being funded by debt saw two-year JGB yields hit their highest since 1996 at 1.3%. The yen had already been sold in anticipation of the victory, so the knee-jerk position adjustment helped the currency to a modest bounce. The dollar dipped around 0.3% to 156.80 yen, while the euro and Swiss francs eased from early record highs. Longer term, Japan might now have a government and leader that lasts for more than a year or two, providing a welcome period of stability at a time of wrenching geopolitical change. That's a lot more than the UK can claim, with Prime Minister Starmer having to say goodbye to his chief political adviser over the weekend as the Mandelson affair claims another scalp. It's still not clear whether Starmer can cling to power, or who would replace him if he were ousted by the party, leaving gilts vulnerable to periodic debt scares. Elsewhere, the carnage in leveraged momentum plays looks to have calmed for the moment, with silver up another 3% and Bitcoin steady if rather punch drunk. Delays to U.S. data mean the payrolls report, retail sales and CPI will all be out this week, which could be the first time that's ever happened. Jobs are seen rising a modest 70,000, though statistical quirks in seasonality and the birth-death model mean forecasts range from a 10,000 drop to a 135,000 increase. Analysts also assume there will be large downward revisions to the level of payrolls last year. With markets now heavily priced for a June rate cut from the Fed, an upside surprise to any of the data would have an outsized impact. Key developments that could influence markets on Monday: – ECB speakers include President Christine Lagarde and board member Philip Lane. Bank of England policymaker Catherine Mann speaks – Fed speakers include governors Christopher Waller and Stephen Miran, Fed Bank of Atlanta President Raphael Bostic (Editing by Shri Navaratnam)
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