Take Five: Shaky September by Reuters

U.S. employment numbers take center stage as markets gear up for a turbulent September. France is trying to navigate its political turmoil, Germany is facing regional elections, and African leaders are heading to Beijing.

Here’s a look at what to expect in financial markets this week, with insights from correspondents across Tokyo, New York, Nairobi, and London.

### 1. Labor Insights

As the Federal Reserve prepares for the first monetary policy easing in years, all eyes are on the U.S. employment data set for release on September 6, which will provide hints about the Fed’s potential actions in the coming months. Fed Chair Jerome Powell has indicated that interest rate reductions are on the horizon, with many analysts anticipating a 25 basis point cut at the Fed’s meeting on September 17-18.

Any signs of labor market weakness could reignite recession fears, prompting investors to withdraw from riskier assets. The prospect of larger rate cuts has already dampened the dollar, which is near one-year lows, influenced by expectations that forthcoming monetary easing will diminish the yield differential the U.S. has over other developed countries.

### 2. Market Volatility

Global stocks have rebounded towards record highs after a sharp decline in early August, which was fueled by a Bank of Japan interest rate hike that triggered a cycle of selling and volatility. However, analysts warn that September and October typically see increased stock market volatility. Market expectations for future price swings may be underestimated, according to strategists.

The sell-off in August, sparked by disruptions in carry trades linked to U.S. and Japanese interest rates, led to about $1 trillion being wiped off U.S. technology stocks. While current views suggest that anticipated Fed rate cuts will support stock and bond prices, unexpected economic data could create turmoil across currency markets and provoke additional cross-asset shocks.

### 3. Political Maneuvering in France and Germany

France finds itself in a political quagmire following the successful hosting of the Olympics, with President Emmanuel Macron’s government facing criticism. The Socialist and Green parties have rejected further discussions with Macron, who has dismissed the idea of a leftist coalition. Investors are cautious, leading to a decline in French stock performance, which remains 5% below levels seen prior to Macron’s announcement of a snap election.

Germany, on the other hand, faced its own challenges as the far-right Alternative for Germany party made significant gains in recent regional elections, posing problems for Chancellor Olaf Scholz’s coalition ahead of the 2025 national elections. The economy is faltering, contracting by 0.1% in the second quarter, with some experts warning of an impending crisis. Attention may soon shift from France’s issues to Germany’s political landscape.

### 4. Steadfast Resoluteness in Japan

Despite market fluctuations in August, Bank of Japan officials are committed to pursuing further rate hikes. Central bank head Kazuo Ueda’s recent hawkish stance has come amidst growing concerns of a recession in the U.S. However, Deputy Governor Ryozo Himino underscored that monetary tightening will persist if inflation aligns with the Bank’s expectations, highlighting the need for close market observation.

The trajectory for consumer prices remains uncertain. Recent data showed that Tokyo’s consumer price index rose to 2.4% in August, surpassing the Bank’s target of 2%. However, core inflation, excluding fresh food and energy, was at a modest 1.3%. Retail sales figures from the end of August fell short of expectations, and household spending has dropped every month since February last year, with an update due on September 6.

### 5. African Leaders Convene in China

Government officials from various African nations, including those from Kenya, Senegal, and South Africa, are traveling to Beijing for the Forum on China-Africa Cooperation. This summit occurs every three years and is vital for engagement between the two regions. Recent data revealed that annual Chinese lending to Africa increased to $4.6 billion last year, marking the first rise since 2016; however, this figure is significantly lower than the heights of over $10 billion seen from 2012 to 2018 during the Belt and Road Initiative.

African officials are likely to seek increased financing and investment commitments from China, while some nations, like Ethiopia, will focus on debt restructuring discussions.