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MORNING quote EUROPE-Nikkei retreats, China rallies

A take a look at the day ahead in European and worldwide markets from Wayne Cole.

There's a lot news it's hard to know where to start, what with strife in the Middle East and more stimulus distributes of Beijing. The Nikkei stole the early show with a drop of 4.6% as markets price in the threat of higher interest rates under new Prime Minister Shigeru Ishiba.

He has actually long been a critic of the Bank of Japan's uber-easy policies so investors presume he will not stand in the method of policy normalisation. Still, in fact being in charge can change attitudes and he sounded a lot more conciliatory over the weekend, stating simple policy was needed provided the state of the economy.

Markets still reveal practically no possibility of a BOJ tightening in October, but have 6 bp of hikes for December, so about a 24%. possibility of a quarter-point rise. However, the market only has. the existing 0.25% rate reaching 0.5% by the end of next year, so. it's not precisely a hawkish outlook.

Ishiba's remarks sufficed to help the dollar stable at. 142.64 yen, after Friday's 1.8% drop as low as 142.07. The euro is a shade firmer at $1.1170, having actually got a. lift last week from the benign U.S. core PCE rate index.

The U.S. data left markets pricing in a 52% chance of. another outsized rate cut from the Federal Reserve on Nov. 7,. though certainly the presidential election is a wild card for. that.

A success for Donald Trump would be seen as a danger for. higher inflation and a stronger dollar, offered his stated. choice for wide-scale tariffs. PredictIt shows Kamala Harris. ahead at 57 cents to 48 cents however that is hardly a convincing. lead.

A host of Fed officials will have an opportunity to speak their. minds today, led by Chair Jerome Powell later Monday,. while Friday's August payrolls report looms large in choosing. how big the next cut will be.

While the Nikkei stumbled, Chinese stocks extended. their meteoric run with an increase of 5% after the country's central. bank said it would direct mortgage rates lower.

The property sector got an included increase after first-tier. cities such as Guangzhou raised all home purchase constraints. over the weekend, while Shanghai and Shenzhen announced plans to. ease curbs on purchasing.

The rush of stimulus assisted to balance out a drop in the. Caixin/S&& P International manufacturing PMI to 49.3 in September, and a. downturn in the services PMI to 50.3

Key developments that could affect markets on Monday:

- German CPI and retail sales, French CPI. EU customer and. business sentiment

- Initial declaration by ECB President Christine Lagarde. at ECON Hearing. Bank of England policymaker Megan Greene takes. part in a panel conversation

- Federal Reserve Chair Jerome Powell speaks on the economic. outlook. Fed Board Governor Michelle Bowman speaks

- United States Chicago PMI, Dallas Fed activity index

(source: Reuters)