September Risks Are Stacking Up Fast for Global Financial Markets
By Sophie Kiderlin, Alun John, and Samuel Indyk
Key Market Risks and What to Watch in September
LONDON, Aug 28 (Reuters) — Traders returning from their August breaks face a crowded landscape of risks for global markets, including mounting concerns over high government debt levels and the persistence of inflation.
Here are some of the key developments to watch this month.
1/ HOW MUCH LONGER?
Geopolitical Tensions and Energy Markets
The war with Iran has been a major driver of market sentiment.
Oil and gas prices have seesawed as traders attempt to assess whether, when, and how key waterways — notably the Strait of Hormuz — will reopen. These movements have lifted energy stocks while weighing on major energy consumers, and the resulting inflationary pressure has pressured government bonds.
Global growth has so far withstood higher prices, but the market buffers that cushioned the initial shock are now wearing thin.
Short-Term Focus: Iran-Oman Talks
In the near term, talks between Iran and Oman aimed at managing the Strait of Hormuz remain the central focus.
Long-Term Considerations: Geopolitical and Economic Rebalancing
Longer-horizon investors are weighing broader geopolitical and economic rebalancing, including potential pipeline projects designed to bypass Hormuz and the emergence of new regional groupings — for example, between Saudi Arabia, Pakistan, and Turkey.
2/ FED, BOJ IN HOT SEAT
Central Bank Decisions and Market Volatility
The U.S. Federal Reserve and the Bank of Japan will both hold policy meetings in the same week, potentially delivering a double dose of market volatility.
Federal Reserve: Communication and Credibility
What Chair Kevin Warsh conveys at the Fed’s September 16 meeting may prove as significant as the policy decision itself: markets currently price in roughly a 40% chance of a rate hike.
Warsh, who is set to speak at the Jackson Hole Symposium on Friday, has emphasized the importance of the Fed taking its cues from markets, but his sparse communication style has generated confusion.
Recent U.S. Treasury intervention in bond markets — which can dilute market signaling — further complicates the picture.
“How the Fed is going to communicate going forward is important because it impacts their overall credibility and global interest rates,” said St. James’s Place Chief Investment Officer Justin Onuekwusi.
Bank of Japan: Rate Hike Expectations
In Japan, which recently intervened to strengthen the yen, markets expect a BOJ rate hike on September 18. The bank’s forward guidance will also be closely scrutinized.
“It’s all about the narrative and how hawkish the governor sounds,” said Hank Calenti, chief strategist for global markets at SMBC EMEA, adding that the tone could meaningfully reshape Japan’s bond yield curve.
Ten-year yields are approaching 3%, their highest level since the mid-1990s.
3/ AI OPTIMISM GETS THE ANTHROPIC TEST
Tech IPOs and Market Sentiment
Anthropic is widely expected to be the next mega-cap technology firm to go public, following the blockbuster SpaceX listing in June.
Reports suggest the company hopes to raise as much as $100 billion, which could pose another test for the AI trade as markets digest surging bond issuance from big tech to fund capital expenditure.
“When it comes to Anthropic and OpenAI, there will probably be massively frothy valuations,” said Rory Dowie, multi-asset portfolio manager at Marlborough, commenting on both companies’ IPO prospects.
Anthropic was valued at $965 billion in May. A $1 trillion IPO valuation would place it among the world’s largest listed companies.
“If investor appetite for this theme falters even briefly, there is no diversification cushion,” said Violeta Todorova, senior research analyst at Leverage Shares.
“The read-through hits Nvidia, Microsoft, and every stock already priced for AI infrastructure demand — not just the new listings.”
4/ SHOWDOWN FOR FRANCE
French and German Fiscal Challenges
The French government is expected to submit a draft budget to the National Assembly in the coming weeks.
A fiscal battle looms as the government seeks to keep the deficit under control ahead of the 2027 presidential election, which polls suggest could favor the far right.
“There is risk of OAT (French bond) yields moving up,” said Zurich Insurance Group Chief Economist Guy Miller. “But we don’t think it’s to the extent that really undermines the construct of euro debt.”
Germany’s bonds could also face pressure as Chancellor Friedrich Merz confronts a series of state elections. His popularity has declined following several political missteps, and the far-right AfD could outperform Merz’s party in some votes.
5/ BURNHAM’S BRITAIN
UK Fiscal Policy and Political Landscape
New British Prime Minister Andy Burnham’s policies have so far drawn limited market concern, though his efforts to stimulate growth within constrained fiscal parameters could alter that calculus.
The October budget and the Labour Party Conference in September will serve as early tests for Burnham and new finance minister John Healey.
Britain’s 10-year borrowing costs remain elevated, though they have edged down from 18-year highs reached in May.
The lasting scars of the 2022 mini-budget crisis may encourage fiscal restraint from the new government. Burnham has stated his commitment to adhering to the UK’s fiscal rules.
“There is a risk they try and push the envelope, and I think that would be a mistake,” said Berenberg senior UK economist Andrew Wishart.
6/ ELECTION SEASON
US Midterms and Market Implications
Campaigning for November’s U.S. midterm elections traditionally intensifies in September, with potential implications for policy direction.
Consumers are closely watching gasoline prices, which have climbed above $4 per gallon on average amid the Iran war, up from below $3 in January.
President Donald Trump told Americans this month that higher prices are a worthwhile cost of defeating Iran, but some analysts believe he will seek lower prices before voters head to the polls.
Jefferies chief European economist Mohit Kumar also links the election to Treasury Secretary Scott Bessent’s efforts to bring down borrowing costs.
“The Trump administration cannot afford higher long-term rates going into the midterms, as mortgages are tied to the long end of the (Treasury) curve.”
(Reporting by Sophie Kiderlin, Alun John, Samuel Indyk, and Dhara Ranasinghe; Editing by Sharon Singleton)
