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Yen weakens, Nikkei rises 1.8% after Ishiba resignation

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Ishiba resignation bring more fiscal uncertainty

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Stocks rise as traders pencil in rate cut in September

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US inflation data this week also in focus

(Updates after China open)

By Ankur Banerjee

SINGAPORE, Sept 8 (Reuters) - Stocks rose and the dollar

wobbled on Monday after dismal U.S. labour data sealed the case

for an interest rate cut this month, while the yen fell as

investors girded for uncertainty in Japan following the

resignation of Prime Minister Shigeru Ishiba.

Gold prices held near a record-high while U.S. Treasury

yields hovered close to five-month lows after data showed the

world's largest economy created far fewer jobs than expected in

August, with markets factoring in chances of a jumbo rate cut.

Much of the focus last week was on elevated long-end bond

yields across the globe as investors fretted about the state of

various countries' finances from Britain and France to Japan.

Some of those worries could return after Japan's Ishiba

resigned on Sunday, leading to political uncertainty in the

world's fourth-largest economy and clouding the policy path for

the Bank of Japan.

The spotlight will be on who replaces Ishiba, with investors

fretting that 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, could take the helm

next.

Yields on super-long Japanese government bonds (JGBs) have

already been hovering near record highs, while Japan's Nikkei

share gauge has recently slipped from last month's all-time

peak.

"The markets are going to be framing this around what it

means for fiscal policy, inflation and the BOJ's response," said

Kyle Rodda, senior financial market analyst at Capital.com.

"I suspect this will weaken the yen a bit and could actually

boost stocks. But the latter relies on some leadership certainty

first, so the initial move could be a marginally weaker yen."

The yen fell across the board and was last 0.6%

lower at 148.39 per dollar, while the Nikkei surged

1.8%, just shy of its recent record-high.

MSCI's broadest index of Asia-Pacific shares outside Japan

was 0.4% higher. Blue-chip China stocks

rose 0.3% in early trading while Hong Kong's Hang Seng

index gained 0.35%.

RATE CUTS ARE HERE

The prospect of an interest rate cut by the Federal Reserve

later this month propped up stock markets while weighing on

Treasury yields and the dollar.

S&P 500 futures pointed 0.19% higher in early Asian

hours on Monday after a volatile session on Friday where the

index hit a record high but then closed 0.3% lower. European

futures advanced 0.45%.

The U.S. two-year yields, which are tied to interest rate

policy, were 2 basis points (bps) higher at 3.527%,

near the five-month low of 3.464% hit on Friday.

Investor attention this week will be on the U.S. inflation

report on Thursday to gauge the risk of rising prices that could

help temper some of the enthusiasm for a larger rate cut.

"While most investors remain aligned on a 25-basis-point cut

at the September Fed meeting, we expect market focus to shift

toward calls for a larger move, with a 50bp cut now in play,"

said Harun Thilak, head of global capital markets North America

at Validus Risk Management.

Traders have fully priced in a 25 bp cut later this month

with 8% chance of a jumbo 50 bp rate cut, the CME FedWatch tool

showed. They are anticipating 68 basis points of easing by the

end of this year.

"The Fed has more than enough reasons and will cut by 25bps

... with another two within six-months," said George Boubouras,

head of research at K2 Asset Management.

"U.S. cash rates are notably higher than other developed

markets (and) given the resilient and robust U.S. economy, lower

cash rates are now required. Fed commentary of further rate cuts

will be supportive, without this equity markets will be

weaker."

In the currency market, the euro eased a bit to

$1.1713 after surging 0.6% on Friday, while sterling

last fetched $1.3492 after a 0.5% rise on Friday.

Investor attention will also be on France where Prime

Minister Francois Bayrou faces a confidence vote on Monday,

which he is expected to lose, plunging the euro zone's

second-largest economy deeper into political crisis.

In commodities, gold prices were at $3,588 per ounce, just

shy of the $3,600 milestone. Gold is up 37% this year

after rising 27% in 2024.

Oil prices climbed after OPEC+ 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 about 1% each.