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Yen weakens, Nikkei rises 1.8% after Ishiba's resignation

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Stocks rise as traders pencil in rate cut in September

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French political quagmire adds to investor angst

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US inflation data this week also in focus

(Updates with early European trading)

By Ankur Banerjee and Alun John

SINGAPORE/LONDON, Sept 8 (Reuters) - Stocks rose and

Treasury yields held lower on Monday after last week's dismal

U.S. labour data sealed the case for an interest rate cut this

month, with investors preparing for a week heavy on politics,

crucial data and central bank activity.

U.S. S&P 500 futures were up about 0.2%, leaving the

index set to head back towards the record intraday high hit

following last week's jobs data, while European and

Asian shares were up 0.2% and 0.7%, respectively.

The first political drama of the week took place in Japan,

where the yen and longer-dated bonds fell and stocks rose

following the resignation of Prime Minister Shigeru Ishiba, as

traders bet heightened political uncertainty would make the Bank

of Japan less likely to raise rates in the near term.

Attention is turning to who will replace Ishiba, and whether

it could be an advocate of looser fiscal and monetary policy

such as Liberal Democratic Party veteran Sanae Takaichi, who has

criticised the BOJ's interest rate hikes.

Meanwhile, France could be forced to look for its fifth

prime minister in three years as the incumbent Francois Bayrou

faces a confidence vote on Monday that he is expected to lose.

The selloff in French assets after Bayrou called the vote

last month has eased, and French stocks and bonds were slightly

outperforming European peers on Monday.

But uncertainty about whether President Emmanuel Macron

would try to appoint another prime minister or call fresh

parliamentary elections if Bayrou loses means French and wider

European assets are not yet out of the woods.

A slew of upcoming French debt rating reviews are also on

investors' radar.

DOLLAR HELD IN CHECK

The political uncertainty in France and Japan is also

keeping the dollar in check - even after last Friday's soft jobs

data, which has left markets fully pricing in a 25 basis point

rate cut from the Fed later this month, and showing a small

chance of a 50 basis point cut.

The numbers raise "the question as to whether US employment

conditions are now shifting from cooling to deteriorating and if

the Fed should cut rates faster," said Paul Mackel, global head

of FX research at HSBC.

He said this had "opened the door" for the dollar to weaken

again, but with "political noise around the yen and euro, the

likelihood of dollar weakness will be reflected more easily

against other currencies".

The dollar hit a six-week low against a basket of currencies

on Friday after the jobs data.

On Monday, while it was down markedly on the Swiss franc,

and Antipodean currencies, the euro

was just 0.1% higher at $1.1731 and the dollar was even a touch

higher on the yen at 147.6 yen.

U.S. Treasury yields dropped sharply on Friday but were last

steadier, with the benchmark 10-year yield marginally softer on

the day at 4.08% and the rate sensitive two-year

yield at 3.50%.

U.S. CPI data due on Wednesday will be the last major data

point before the Fed's meeting, and a hot print could temper

bets on a super-sized rate cut.

The European Central Bank meets on Thursday, but is expected

to hold rates steady for a second straight meeting.

In commodities, gold continued to surge, hitting its latest

all time high of 3,616 an ounce. The precious metal is up

37% this year after rising 27% in 2024.

Oil prices climbed after the OPEC+ group agreed over the

weekend to raise output at a slower pace from October on

expectations of weaker global demand. Brent crude and

U.S. West Texas Intermediate crude rose 1.6% each.