As Asian markets prepare to kick off a new trading week, investors are bracing for a fresh wave of economic indicators that could shape the region’s trajectory. The recent surprise in US labor market data has sent ripples across global markets, with Treasury yields surging above 4% and traders reassessing the likelihood of a rate cut in November.
Despite the Fed’s hawkish tone, Asia’s rally is expected to remain resilient, driven by mainland Chinese investors returning from the Golden Week holiday. Beijing’s aggressive stimulus measures, aimed at reviving the country’s flagging economy, will be closely watched for signs of effectiveness.
In the US, the yield curve continues to steepen, with the 10-year and two-year notes reaching their highest levels since late July and mid-August, respectively. Fed funds futures now suggest an 85% chance of a quarter-point rate cut in November, with a 15% chance of no change.
The dollar, meanwhile, consolidated last week’s gains, ending slightly lower against the yen and Swiss franc. Middle East tensions, which threatened to escalate into a wider conflict, supported safe-haven currencies.
In Asia, Japan’s Nikkei led the charge, rallying almost 2% on Monday, while MSCI’s broadest index of Asia-Pacific shares climbed nearly 1%. Key economic releases on Tuesday include Australia’s consumer sentiment, Japan’s Tankan manufacturing and service indexes, and Taiwan’s trade balance.
As markets navigate the shifting landscape, investors will be closely watching for signs of economic resilience and policy direction. Will Asia’s rally continue to defy global headwinds, or will the Fed’s hawkish tone begin to take its toll?
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