On Monday, Asian stock markets experienced a significant rally, and the US dollar reached a new seven-week high against the yen. This came after impressive US labour market data released on Friday, which eased recession fears and led to reduced expectations of imminent rate cuts. US Treasury yields also hit two-month highs, continuing to climb after the release of the non-farm payroll report, which showed a surprising six-month high in job additions for September.
While regional equities were buoyed by the news, crude oil prices slightly receded from a one-month high, even as tensions escalated with Israel bombing targets in Lebanon and the Gaza Strip. The timing coincided with the one-year anniversary of the Hamas attack that ignited the ongoing conflict. Among regional stock markets, Japan’s Nikkei index led gains, rising by 2.28% thanks to the additional push from a weaker yen. Meanwhile, the Hang Seng index in Hong Kong gained 1.45%, Australian stocks rose by 0.68%, and South Korea’s Kospi saw a 1.53% increase. In contrast, mainland Chinese markets remained closed for the Golden Week holiday, with trading expected to resume on Tuesday.
The broad MSCI index of Asia-Pacific shares climbed more than 1%, while futures for the US Dow slightly dipped after Friday’s cash index reached an all-time high. Kyle Rodda, a senior market analyst at Capital.com, remarked that the current market reaction highlights critical concerns for investors—particularly economic growth and its implications for equities and future earnings. He also pointed out a potential revival of the US “economic exceptionalism” theme.
The dollar advanced as high as 149.10 yen, its highest level since mid-August, before retreating to around 148.49 yen. This climb was halted after Japan’s currency diplomat, Atsushi Mimura, indicated that officials were monitoring exchange rate movements closely, especially regarding speculative trading activity. The euro also saw a slight decline, easing 0.08% to $1.0966, moving closer to Friday’s seven-week low.
Market expectations regarding US Federal Reserve policy also shifted after the jobs report. The likelihood of a 50-basis-point rate cut at the upcoming 7 November policy meeting—once considered a real possibility—was completely eliminated. Instead, traders now overwhelmingly anticipate a smaller quarter-point cut, with some still considering the chance that rates will remain steady. Michael Brown, a senior research strategist at Pepperstone, echoed this sentiment, suggesting that the concept of US economic strength is once again gaining traction. He also noted that the strong jobs report bodes well for consumer spending and suggests a “soft landing” for the economy. Despite the current market optimism, Brown still expects to see a total of 50 basis points in rate cuts by the year’s end.
In response to the labour market data, the yield on the US 10-year Treasury rose to 3.992%—its highest level since early August—while the two-year Treasury yield reached 3.965%, a level last seen in late August. The rise in US yields pulled up yields in other regions, with Japanese government bond yields also hitting their highest levels since early August at 0.915%. Gold prices, meanwhile, fell by 0.35% to $2,643 per ounce due to the renewed strength of the dollar, although prices remained near last month’s record peak of $2,685.42.
Crude oil prices retreated after recording their largest weekly gains in over a year amid concerns about escalating conflict across the Middle East. Brent crude futures dropped by 35 cents, falling to $77.70 per barrel after hitting $79.30 on Friday—the highest since late August. Likewise, US West Texas Intermediate (WTI) crude futures declined by 25 cents to $74.13 per barrel, down from a peak of $75.57 on Friday.
Fidelity Japan Trust PLC (LON:FJV) aims to be the key investment of choice for those seeking Japanese companies exposure. The Trust has a ‘growth at reasonable price’ (GARP) investment style and approach – which involves identifying companies whose growth prospects are being under-appreciated or are not fully recognised by other investors.
