Asian stock markets experienced a significant surge on Monday, fueled by robust labor data from the United States that alleviated recession concerns and led to a reassessment of interest rate cut expectations. The U.S. dollar also gained momentum, reaching its highest point against the Japanese yen in seven weeks.
According to the U.S. non-farm payrolls report released on Friday, the economy added significantly more jobs in September than anticipated, marking the largest increase in six months. This unexpected growth led to rising short-term U.S. Treasury yields as investors revised their forecasts for future Federal Reserve actions.
In the commodities market, crude oil prices softened from recent highs, despite ongoing military actions in Israel, which marked the one-year anniversary of the Hamas attack that escalated regional tensions.
Japan’s Nikkei index stood out with an impressive rise of 2%, largely driven by a weakened yen that made Japanese exports more attractive. In contrast, Australia’s stock index enjoyed a modest increase of 0.12%, while South Korea’s Kospi gained 0.29%. Meanwhile, trading in Hong Kong’s Hang Seng was pending, as mainland Chinese markets were closed for the Golden Week holiday.
The MSCI Asia-Pacific index rose by 0.4%, reflecting a positive sentiment across the region. Additionally, U.S. Dow futures hinted at a slight increase of 0.08%, following the Dow’s record-setting performance last week post-labor report.
Kyle Rodda, a senior financial market analyst at Capital.com, commented on the market reaction, suggesting that current themes revolve around economic growth and its implications for corporate earnings. He noted a revival of interest in the “U.S. economic exceptionalism trade,” a sentiment underscored by the movement in financial markets.
The currency markets were equally dynamic. The dollar peaked at 149.10 yen before slightly retreating to 148.87 yen, up 0.18%. Japan’s currency officials, including top diplomat Atsushi Mimura, stated they are closely monitoring currency fluctuations, especially those driven by speculation.
In the European currency market, the euro slightly declined by 0.07% to settle at $1.0971, edging closer to a seven-week low. The markets have now shifted their betting on Federal Reserve policy, with expectations for a more conservative quarter-point interest rate cut spiking to 95%. This revised outlook eliminates earlier forecasts for a hefty 50-basis-point cut at the upcoming Fed meeting on November 7, according to the CME Group’s FedWatch Tool.
U.S. Treasury yields reflected this sentiment, with the two-year yield rising by 1.7 basis points to hit 3.9488%, the highest level in over a month. Gold prices dipped slightly by 0.1% to $2,649.29 per ounce, remaining just below last month’s peak of $2,685.42, which was driven by inflation and geopolitical tensions.
Crude oil prices dropped after last week’s substantial gains, with Brent crude futures falling by 65 cents to $77.40 per barrel. U.S. West Texas Intermediate crude also declined, losing 53 cents to trade at $73.85 per barrel.
Overall, the positive labor data from the U.S. not only invigorated stock markets in Asia but also instigated a shift in investor sentiment regarding monetary policy. The prevailing optimism about economic growth is likely to keep market dynamics lively, particularly as we approach key financial announcements in the coming weeks.