A look at the day ahead in U.S. and global markets from Mike Dolan

The final day of another punchy quarter for U.S. stocks has proven a more volatile affair overseas: China's stellar stock recovery has added another whopping 8% pre-holiday, while Tokyo's swoon on the new Japanese prime minister jarred in the other direction.

For Wall Street, Federal Reserve Chair Jerome Powell tees up in Nashville later to give his latest steer on the unfolding Fed easing cycle, with soothing August inflation numbers as a welcome backdrop. The rest of the week looks set to be dominated by soundings on the labor market, the upcoming earnings season and the start of the election-edged final quarter.

China, however, continues to hold global investors in thrall after last week's sweeping series of monetary stimuli and real estate and stock market props. The hyperactive policy scramble kept going over the weekend, with China's central bank on Sunday telling banks to lower mortgage rates for existing home loans before the end of October.

And so on the final trading session before mainland markets close for a four-day national holiday, China's benchmark stock indexes boomed by more than 8% - making it the best single day in 16 years and the best month in more than a decade.

The cumulative surge over the past week has now wiped out both year-to-date and 12-month losses.

What for some investors appears like a "whatever it takes" policymaking urgency in Beijing may well be necessary, if dour business survey readings for September were anything to go by.

And the yuan, which had also been lifted by the credit easing and wider stimulus last week, fell back amid repeated reports of dollar buying by state banks.

By contrast and perhaps partly reflecting renewed appetite for Chinese stocks, Japan's Nikkei plunged almost 5% on the final day of Q3, with investors seemingly wary of the new prime minister - perceived monetary policy hawk Shigeru Ishiba - and his call for an October election.

The yen edged lower by the end of the day - amid some confusion about Ishiba's current stance.

Ishiba has been critical of the Bank of Japan's extraordinary stimulus of the previous decade, and his reported choice for finance minister, Katsunobu Kato, called for continued normalisation of monetary policy in May.

However, Ishiba told national broadcaster NHK at the weekend that "monetary policy must remain accommodative as a trend given current economic conditions".

In Europe, the focus was on the latest sub-target inflation numbers from Germany - adding to similar disinflation in France and Spain - as well as a worrying manufacturing slump and a gathering storm in the auto sector.

A win for the Nazi-rooted Freedom Party in Austria's weekend parliamentary elections darkened the mood.

European stock benchmarks lost almost 1%, although the euro edged higher against a generally weaker dollar.

Auto shares fell 3% after Volkswagen compounded recent woes by cutting its 2024 guidance while Stellantis slumped 8% after the French-Italian carmaker slashed annual guidance, citing a worsening of global industry dynamics.

The horizon for the sector will hinge in part on the success of the Chinese stimulus alongside any domestic recovery.

The upshot for U.S. markets is that stock futures are marginally in the red ahead of Monday's bell, after a quarter that's seen new record highs for the S&P500 but a rare outperformance of small caps and the equal-weighted S&P as interest rates start to tumble.

With the election coming on to the three-month yearend radar, the VIX volatility gauge popped higher.

U.S. Treasury yields nudged up too ahead of Powell's set piece later.

Key developments that should provide more direction to U.S. markets later on Monday:

* Dallas Fed September manufacturing survey, Chicago Sept PMI

* Federal Reserve Chair Jerome Powell speaks in Nashville, Fed Board Governor Michelle Bowman speaks; European Central Bank President Christine Lagarde speaks to European Parliament; Bank of England policymaker Megan Greene speaks

* US corporate earnings: Carnival, Precision Optics, Spectra Systems, EnerSys, Repositrak

* US Treasury sells, 3-month, 6-month bills

(By Mike Dolan, editing by Mark Heinrich; [email protected])