Markets Today: Gold Surges Above $3700/oz, China Keep Rates on Hold and FTSE Holds at Support

[Ben Graham]

Asia Market Wrap - Asian Stocks Start Week on the Front Foot

Most Read: Markets Weekly Outlook - PMI and PCE in the Spotlight as US Dollar Remains Sensitive to US Labor Data

Asian stock markets rose, following a strong performance on Wall Street. Japanese stocks, in particular, saw a significant boost as worries eased about the Bank of Japan's recent plan to sell its large holdings of exchange-traded funds.

As a result, the region's overall stock index, the MSCI, went up by 0.2%, and Japan's Nikkei-225 index jumped by as much as 1.6%.

Meanwhile, in India, stocks for IT companies declined as traders began to evaluate the potential negative effects of a sharp increase in H-1B visa application fees. This new fee, which is a one-time charge of $100,000 on new petitions, has raised concerns within the industry.

In other political news, the race to choose the next leader of Japan's governing party began.

This contest is being closely watched by the financial markets because the winner is expected to become the country's next prime minister, following the decision by the current leader, PM Ishiba, to step down. Ishiba's resignation comes after his party suffered major losses in recent elections.

China Keeps Lending Rate on Hold

In line with what markets expected, the People's Bank of China (PBOC) decided to keep its main lending rates at their current, record-low levels for the fourth month in a row. This decision follows its move last week to also keep the seven-day reverse repo rate unchanged.

The one-year Loan Prime Rate (LPR), which is the benchmark for most business and personal loans, remained at 3.0%. Similarly, the five-year LPR, used for setting mortgage rates, stayed at 3.5%. Both of these rates were last lowered in May by 0.10%.

This decision by the central bank came at a time when trade tensions between China and the US appeared to be easing. However, it also came against a backdrop of slowing economic growth within China and new policy moves from the US Federal Reserve. Recent data showed that industrial production in August grew at its weakest pace since August 2024, and retail sales growth hit a nine-month low. While new loans issued in the local currency rebounded after an unexpected drop in July, the overall expansion of credit still did not meet expectations.

European Open - Shares Steady At Start of the Week

European stocks remained stable on Monday, with gains in technology companies being offset by losses in the automotive sector. This was a day of waiting for investors, who were looking ahead to comments from several Federal Reserve officials.

The pan-European STOXX 600 index was largely unchanged, though Spanish stocks performed particularly poorly, dropping by 0.9%.

In company news, German luxury carmaker Porsche saw its shares fall by 4.7% after it lowered its profit forecast for 2025. This decision was made because the company is slowing down its plans for rolling out electric vehicles due to weaker demand. Its parent company, Volkswagen, also cut its 2025 profit outlook and saw its stock slide by 4.5%.

On the positive side, technology stocks rose by 0.9%, with chip manufacturers ASML and ASMI gaining 2.9% and 1.9%, respectively.

In other company news, shares of the Dutch geo-data company Fugro plunged by 11.9% after the company withdrew its annual financial forecast, citing "significant changes" in market conditions in recent weeks.

On the FX front, The Japanese yen's recent gains against the US dollar were largely erased, with the yen falling by 0.2%. This retreat comes after a "hawkish" shift in the Bank of Japan's tone last week, which suggested that an interest rate hike might be coming soon.

Meanwhile, the British pound dropped to its lowest value in two weeks, reaching $1.3453. It was under pressure from a combination of domestic problems, including a recent sharp increase in UK government borrowing and a Bank of England decision that highlighted the difficulty for policymakers in balancing economic growth with controlling inflation.

The euro also weakened slightly, falling by 0.15% to $1.1731.

In other currency news, the Australian dollar saw a small increase of 0.07% to $0.6595, getting some support from positive economic comments made by a senior central banker. The New Zealand dollar also edged up by 0.03% to $0.5858.

Finally, the Chinese yuan firmed slightly to 7.1136 per dollar. This was helped by a reduction in trade tensions between the US and China, as well as China's decision to keep its key lending rates unchanged.

Currency Power Balance

Source: OANDA Labs

Oil prices increased on Monday, driven by ongoing political tensions in Europe and the Middle East. However, these gains were partially limited by two main factors: the expectation of more oil becoming available on the market and concerns that trade tariffs would negatively affect global fuel demand.

Specifically, the price of Brent crude oil futures rose by 45 cents (0.67%) to $67.13 a barrel. Meanwhile, the US West Texas Intermediate (WTI) crude contract for October, which expires on Monday, went up by 47 cents (0.75%) to $63.15 a barrel. The more actively traded November WTI contract also saw an increase of 43 cents (0.69%), reaching $62.83 a barrel.

Gold prices reached a new record high on Monday. This was driven by investors seeking a safe place for their money after the U.S. Federal Reserve cut interest rates last week and suggested that more rate cuts could be on the way.

Investors are also paying close attention to upcoming events this week, including a series of speeches from Fed officials and the release of new US inflation data.

Spot gold rose by 0.7% to $3,709.29 per ounce, hitting a record high of $3,711.55 earlier in the day.

Economic Calendar and Final Thoughts

Looking at the economic calendar, the European session is a quiet one.

The main event for the day will be commentary from at least five Fed officials including New York Fed President John Williams and newly appointed Governor Stephen Miran would be on the radar.

We also have speeches from BoE and ECB policymakers on the agenda which could stoke volatility further.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the Day - FTSE Index

From a technical standpoint, the FTSE 100 has bounced at a crucial support level. A sign of things to come?

A move higher here needs to gain acceptance the swing high at 9247 before 9280 and 9300 come into focus.

The RSI period-14 also eyes a bullish momentum shift as the index eyes a break of the 50 neutral level.

On the downside, support rests at 9213 and 9180.

FTSE 100 Four-Hour Chart, September 3. 2025

Source: TradingView.com (click to enlarge)

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