Highlights:

– Equities climb worldwide amid growing bets on U.S. interest rate cuts.
– The Japanese yen plunges after Prime Minister Shigeru Ishiba announces resignation.
– Political uncertainty in Tokyo adds to global market volatility.

Global equities advanced on Monday as investors embraced rising expectations for imminent U.S. interest rate cuts, while the Japanese yen tumbled after Prime Minister Shigeru Ishiba resigned unexpectedly. The move triggered fresh political uncertainty in the world’s third-largest economy, amplifying volatility across currency and bond markets. Investors now face a complex landscape where monetary easing optimism collides with geopolitical and domestic risks.

Equities Lifted by Rate-Cut Optimism

Global stock indices extended gains, supported by mounting confidence that the U.S. Federal Reserve will soon begin easing monetary policy. Futures markets are pricing in multiple rate cuts by year-end, following a string of weaker U.S. labor and consumer data. The S&P 500 and Nasdaq both closed last week with strong momentum, and European markets mirrored the rally, with the STOXX 600 climbing to its highest level in nearly two months.

For Israeli markets, rate-cut optimism also provided support. The TA-35 and TA-125 indices opened the week higher, driven by financials and tech stocks that benefit from lower borrowing costs. A weaker dollar, stemming from rate-cut speculation, has additionally boosted appetite for risk assets globally, reinforcing the upward momentum.

Yen Tumbles on Ishiba’s Departure

The sharpest market reaction, however, came from Tokyo, where Prime Minister Shigeru Ishiba announced his resignation, citing declining approval ratings and internal party pressures. The yen slid more than 1% against the U.S. dollar, reaching multi-month lows, as traders priced in prolonged political instability.

The resignation raises questions over Japan’s fiscal and economic policy trajectory at a sensitive moment, with inflation still above target and the Bank of Japan gradually shifting away from ultra-loose monetary policy. A weaker yen could boost exporters but also risks importing additional inflation through higher energy and commodity prices. For global investors, the currency move underscores Japan’s central role in shaping Asian and international capital flows.

Global Macro Implications

The combination of U.S. monetary easing expectations and Japan’s political upheaval highlights the fragile balance global markets face. On one hand, looser financial conditions from the Fed could extend the equity rally and ease credit pressures. On the other, heightened uncertainty in Japan threatens to disrupt regional stability, particularly if leadership changes trigger delays in structural reforms or fiscal planning.

Commodity markets also responded, with gold holding near record highs as investors sought safety against both currency volatility and broader macro risks. Meanwhile, oil prices inched higher on supply concerns, further complicating the inflation outlook for central banks worldwide.

Looking ahead, investors will closely watch U.S. inflation data, Federal Reserve communications, and developments in Japan’s leadership race. Markets remain sensitive to shifts in rate expectations and political signals alike. With monetary easing on the horizon but geopolitical uncertainty rising, global investors must navigate an environment where optimism and caution coexist in equal measure.