Japan GDP data and lingering geopolitical risks set the tone for Monday’s markets

Global markets on Monday are likely to be driven mainly by fresh economic data out of Japan and the broader backdrop of geopolitical and policy uncertainty. 1) Japan Q4 GDP and policy expectations (primary driver – impact 3) Japan’s fourth‑quarter GDP report, due Monday, is the key scheduled event for the start of the week. Investors will be watching to see if Japan’s economy shows a meaningful rebound after earlier periods of weaker growth. A stronger‑than‑expected GDP reading would reinforce the view that Japan is emerging from stagnation, which could support risk appetite across Asian equities and spill over into global markets via improved sentiment toward cyclical and export‑oriented sectors. At the same time, Japan’s core inflation has been running above the Bank of Japan’s 2% target, keeping alive expectations that the BoJ may gradually move away from its ultra‑easy monetary policy. If GDP comes in strong, markets may price in a higher chance of eventual rate hikes or further tweaks to yield‑curve control, which could push Japanese government bond yields higher and strengthen the yen. That combination—better growth but tighter policy expectations—will shape how global investors position in equities, bonds, and currencies at the start of the week. 2) Persistent geopolitical and tariff uncertainties (impact 2) Beyond Japan, markets remain sensitive to ongoing geopolitical tensions and the risk of new or higher tariffs in key trade relationships. These uncertainties can weigh on global risk sentiment by raising questions about future trade flows, supply chains, and corporate profit margins. If headlines over the weekend or early Monday point to an escalation in geopolitical frictions or trade disputes, investors may adopt a more cautious stance, favoring safer assets and pressuring equities, particularly in export‑dependent regions. 3) Macro uncertainty ahead of major US data later in the week (impact 2) While the main US economic releases—such as PMI, inflation, and GDP data—are scheduled for later in the week when US markets are fully open, their anticipation can still influence Monday’s trading globally. Investors may be reluctant to take large directional positions ahead of these reports, especially given the mixed signals from recent global data. This can translate into more subdued volumes and a focus on defensive positioning on Monday, with traders using Japan’s GDP as the first major data point to gauge global growth momentum before the heavier US data calendar hits. Overall, the tone for Monday is cautiously constructive but fragile: a solid Japanese GDP print could provide a near‑term boost to risk sentiment, but lingering geopolitical and tariff risks, combined with uncertainty ahead of key US data, may limit how far markets are willing to rally.