The coming weeks in global capital markets are set for potential volatility, as recent political developments in Japan add uncertainty. The ruling Liberal Democratic Party (LDP) and its coalition partner, Komeito, lost their majority, triggering a sharp drop in the yen. Excluding the mixed performance in Scandinavian currencies, other G10 currencies saw little change, hovering around +/- 0.15%. Equities, however, climbed higher, with U.S. index futures up between 0.4% and 0.7%.
Gold dropped by $16 to about $2,731.50, remaining within the previous range. Meanwhile, a limited strike by Israel on Iran, and the expectation of no immediate retaliation, caused a substantial dip in oil prices, with December WTI futures falling to around $67.40 after closing at $71.80 last week.
Asia-Pacific Markets
Political changes in Japan affected Asia-Pacific markets, especially as the yen continued a four-week downtrend amid the LDP coalition's failure to secure a majority. The yen dropped further amid renewed selling.
In Australia, market activity started gradually, with the primary focus on the upcoming Consumer Price Index (CPI) release on Wednesday. However, this data is unlikely to sway the Reserve Bank of Australia’s upcoming decision.
The Australian dollar, which fell to $0.6600 before the weekend, slid to $0.6580 before rebounding to nearly $0.6610, where it struggled to gain further ground.
European Markets
Europe’s markets opened cautiously as investors awaited significant economic updates. The Eurozone’s preliminary Q3 GDP figures will be released on Wednesday, followed by the UK Chancellor’s Autumn budget announcement.
The euro, after hitting resistance near $1.0840, slipped back to $1.0780 before modestly rebounding to around $1.0820.
Sterling also faced challenges, dropping to $1.2940 before finding support and rising back to $1.2980, after hitting resistance near $1.30 before the weekend.
American Markets
Investor focus in the U.S. shifts toward labor market data, with the ADP private sector employment report and the GDP figures both expected soon. Although the JOLTS report will be released a day before GDP, its market impact has softened.
In Canada, the Canadian dollar has faced downward pressure throughout the month, declining in all but four trading sessions, and remains vulnerable to further losses.