Politics and Mergers Move Markets on Monday

With the US government still shut down, investor focus has turned to developments elsewhere, particularly related to politics and corporate actions.

The Nikkei soared 4.75% overnight on the news that Sanae Takaichi, a known conservative, has been elected as the new leader of Japan’s ruling Liberal Democratic Party. On the other hand, the CAC is down 1.2% on the news that, unable to reach a budget deal, French PM Sebastien Lecornu has resigned after just 27 days in office keeping the country in political turmoil. These developments have currencies tumbling, with the Yen falling 1.7% and the Euro sliding 0.5%.

Crude Oil is up 0.9% this morning after OPEC+ announced a 137K production quote increase for next month, which is less than rumors last week had suggested. Copper, conversely, is down 0.9%. Gold is up 1.2% trading at a new high above $3,900/oz.

The first few days after the end of a quarter are known as Confession Season, when struggling companies often release profit warnings but this time around, the focus has been on big deals. Advanced Micro Devices is up 35.4% premarket today on a potential 10% investment in the company from OpenAI.

In addition, there is also a big deal in the US regional banking sector with Comerica and Fifth Third Bancorp agreeing to merge. Meanwhile, in the UK today, Aston Martin is down 7.0% after profit warnings reminded investors that some companies face significant disruption from US tariffs.

Amid all these developments, NASDAQ futures are up 0.9%, while Dow futures are up 0.2%. European trading finds the DAX and FTSE both up 0.2%.

The first Q3 earnings reports, from Pepsico and Delta Air Lines, will be released on Thursday, but earnings season doesn’t really get underway until next week when US banks start reporting results. There are several Fed officials speaking this week, including Chair Powell on Thursday. Friday’s Canadian employment report may attract more attention than usual in the absence of US reports.

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