What moved
Japan is the story overnight. The Nikkei 225 has fallen 1.17% to 65,620.5 with its session all but done, as the yen firmed 1.57% against the dollar to 153.75 — a punishing combination for an exporter-heavy index. Elsewhere in Asia the moves are smaller: the Hang Seng is off 0.35%, the Shanghai Composite is a fraction higher at +0.09%, and the Kospi has given back 0.18% after a 6.4% run over five sessions.
US cash markets were shut on Monday for Labor Day, so the last print is Friday's: the S&P 500 closed 0.38% lower at 7,718.6, the Nasdaq Composite 0.29% lower and the Dow 0.51% lower. S&P 500 futures are trading 0.35% below Friday's settlement, with Nasdaq 100 futures near flat — the only live read on the American day. Europe's Monday close was directionless: the FTSE 100 slipped 0.08% to 10,822.13, the DAX 0.15%, while the CAC 40 added 0.33%.
Why
Two forces are doing almost all the work. In Japan, an upward revision to second-quarter GDP and strong July wage data have hardened expectations that the Bank of Japan tightens again, pushing the yen to its firmest in months — it has gained 4.0% against the dollar in five sessions. That is straightforwardly bad for the Nikkei's large exporters, whose foreign earnings shrink when translated back into a stronger currency, and it explains why Tokyo can fall while the rest of Asia barely moves.
The second is energy. Strikes between US and Iranian forces in and around the Strait of Hormuz — roughly a fifth of seaborne oil in normal times — have continued through the weekend, with tankers hit on both sides and Saudi refining capacity attacked. Brent is up 2.61% at $98.79 and WTI 2.95% at $94.18, extending gains of 12.6% and 14.7% respectively over the past month. Copper, up 2.42% and sitting less than 1% below its 52-week high, suggests this is a supply-side squeeze rather than a demand story.
The knock-on is inflationary, and that is the honest reason futures are soft: with US PPI and CPI both due this week, a fresh oil shock narrows the path for rate cuts just as Japan's is widening.
Sentiment & risk appetite
This is caution, not fear. The VIX last stood at 15.30, up 5.3% but still well down from its 52-week high; the MOVE index of rates volatility fell 2.11% to 73.1, so the bond market is not pricing disorder. Gold is up 0.39% at $4,447.1 and the dollar index down 0.33%, a defensive tilt with no rush. Under the surface Monday was thin: PrimerIQ's own universe shows UK advancers trailing decliners 321 to 448 and European breadth at 0.83 advancers per decliner. Friday's US sector dispersion tells the same narrow story — technology up 0.70% against consumer discretionary down 1.33% and communication services down 1.19%. Bitcoin, down 2.46% to $78,374, is the clearest sign of risk appetite being trimmed at the margin.
Economic calendar
Japan's revised second-quarter GDP and July wage figures landed during the Tokyo morning and drove the day's biggest move; both came in strong enough to reinforce the case for a September Bank of Japan hike. The BRC's August retail monitor showed UK like-for-like sales growth slowing to 0.5% year on year from 1.0% in July, with total sales at 0.7% against 1.3%, as the pull-forward of summer spending faded and non-food sales fell 0.8%.
Still ahead, the US NFIB small business optimism index for August is due at 06:00 ET (11:00 BST) and the Treasury sells three-year notes at 13:00 ET (18:00 BST) — a first read on demand before longer auctions later in the week. The heavier tests are Thursday's August PPI and Friday's August CPI, both at 08:30 ET, which will be read against an oil price that has moved sharply since the data were collected.
Earnings
Nothing material has reported in Europe this morning; the freshest results are still Friday's from New York. Lululemon closed 17.38% lower at $100.61 after second-quarter revenue fell 4% to $2.4 billion and the company guided third-quarter sales down around 10%, on volume some 13 times its recent median. Guidewire fell 19.93% and Fair Isaac 16.68% in the same session, part of a broader de-rating of expensive software names that also took Autodesk down 8.26% and Adobe down 6.73%.