• Global markets are facing strong divergence, driven by policy and political turmoil. Japan’s Nikkei index surged to a new record high following the pro-stimulus victory of LDP leader Sanae Takaichi. Investors are anticipating a revival of ‘Abenomics’-style fiscal expansion and a delay in Bank of Japan rate hikes. This has caused the yen to slide past the critical level of ¥150 per USD, which is supportive for Japanese exporters.

• In the US, the ongoing government shutdown (now in its third day) is creating significant policy uncertainty, delaying crucial economic reports and forcing markets and the Federal Reserve to rely on private data. The ISM Services PMI stalled at 50.0 in September, indicating that activity has reached a breakeven point, which has reinforced concerns about a labour market slowdown. U.S. futures are slightly firmer, but caution remains, with gold near a record high as demand for safe havens persists.

Meanwhile, Europe is grappling with severe political instability after French Prime Minister Sébastien Lecornu resigned after less than a month in office, plunging the country into fresh chaos. This has caused French stocks and the euro to fall sharply, with the spread between French and German bond yields reaching a nine-month high. Nevertheless, the Eurozone’s HICP inflation remained at 2.2%, supporting the ECB’s decision to keep interest rates unchanged. Germany’s industrial sector is showing a modest rebound in factory orders (+1.2% month-on-month in August), and the EU is considering tougher steel import safeguards