Asian stock markets experienced significant gains on Monday, while the US dollar reached a seven-week high against the yen, buoyed by surprisingly strong labour market data in the United States. This unexpected economic strength alleviated concerns about an impending recession, reducing expectations of near-term rate cuts and driving a notable rise in US Treasury yields.
US Treasury yields continued their ascent after the non-farm payrolls report on Friday revealed the highest job growth in six months. In September, the US economy added more jobs than anticipated, easing fears of an economic downturn. The 10-year Treasury yield climbed to 3.992% on Monday, the highest since early August, while the two-year yield reached 3.965%.
The rally in Asian stocks was led by Japan’s Nikkei, which rose by 2.28%, supported by a weaker yen. Other regional markets also saw gains: Hong Kong’s Hang Seng rose 1.45%, Australia’s benchmark gained 0.68%, and South Korea’s Kospi increased by 1.53%. The broader MSCI index of Asia-Pacific shares advanced over 1%, reflecting widespread investor optimism. However, Chinese markets remained closed for the Golden Week holiday and will resume trading on Tuesday.
Kyle Rodda, a senior analyst at Capital.com, noted that the markets’ response highlights the importance of economic growth and its influence on future corporate earnings. He also mentioned a renewed emphasis on the concept of “US economic exceptionalism.” In currency trading, the US dollar peaked at 149.10 yen, the highest since mid-August, before settling at 148.49 yen following comments from Atsushi Mimura, Japan’s top currency diplomat, indicating that officials were closely monitoring speculative trading activity. Meanwhile, the euro dipped slightly to $1.0966, approaching its seven-week low.
The robust labour data in the US also influenced expectations for the Federal Reserve’s policy meeting in November. A week ago, there was over a 50% chance of a 50-basis-point rate cut, but those expectations have now vanished. Instead, traders are largely anticipating a smaller quarter-point cut, with some even suggesting rates could remain unchanged. Michael Brown, a senior strategist at Pepperstone, commented that the notion of US economic exceptionalism has returned. He suggested that some market participants are questioning whether the Federal Reserve will opt for two quarter-point cuts by year-end, given the strength in employment and consumer spending.
Investor attention remains focused on the Federal Reserve’s forthcoming policy decisions and ongoing geopolitical tensions in the Middle East, as global markets continue to respond to the better-than-expected economic data.
The robust labour market data from the United States has prompted a strong response across global markets, easing fears of an economic downturn and reducing expectations for significant rate cuts. The surge in US Treasury yields and rising optimism in Asian markets signal confidence in economic resilience, though risks remain with the Federal Reserve’s next moves and regional tensions.
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