Key facts
- The Japanese yen reached its strongest level since February.
- Japan's Q2 GDP estimates were revised higher, and July real wages increased significantly.
- Copper hit an all-time high, influenced by U.S. tariff concerns.
- China reported a 25% year-on-year increase in August exports.
- Canada implemented retaliatory tariffs on U.S. goods.
Global markets experienced volatility as the Japanese yen surged to its strongest level since February, driven by expectations of an imminent Bank of Japan interest rate hike. This move was supported by upgraded Japanese GDP estimates and a significant rise in real wages. The yen's strength, alongside gains in China's yuan and South Korea's won, could lead to the unwinding of yen-funded carry trades worldwide, impacting markets. Tokyo's Nikkei index fell nearly 2% on the news.
Meanwhile, the global economic outlook remains robust, with upward revisions to Eurozone GDP and strong U.S. employment data bolstering the case for further interest rate hikes from central banks, including potentially the Federal Reserve. Adding to market pressures, oil prices edged higher towards $100 per barrel amid geopolitical tensions involving Iran and attacks on Saudi energy facilities.
Copper, a bellwether for global growth, reached an all-time high, partly influenced by U.S. tariff concerns. However, a tension exists between strong growth and rising interest rates aimed at preventing overheating. As Wall Street returned from holiday, stock indices were trading lower.
In trade news, China's exports rose 25% year-on-year in August, widening its trade surplus to $119 billion and putting it on track to exceed $1 trillion for the second consecutive year. China's trade surplus with the U.S. also increased significantly. Separately, Canada's retaliatory tariffs on U.S. goods came into effect, escalating trade tensions between the two nations.