Key Points:
Asian stocks climbed on Monday following strong U.S. labour data, which dispelled fears of a potential recession and prompted investors to pare back their expectations for a Federal Reserve rate cut.
The closely watched non-farm payrolls report revealed that the U.S. economy added the highest number of jobs in six months, supporting risk-on sentiment across global markets.
Japan’s Nikkei 225 led the regional rally, rising by 2%, as a softer yen against the U.S. dollar added momentum to Japanese equities. The dollar surged to 149.10 yen, the highest level since August 16, before stabilising around 148.87 yen.
This followed the U.S. dollar’s broad strength in the wake of last Friday’s data. Japan’s top currency official mentioned they would monitor exchange rate movements, particularly speculative trading, which could influence further intervention.
Picture: Nikkei 225 consolidates after hitting 39,833 resistance, with short-term momentum showing signs of slowing, as seen on the VT Markets app.
Based on the chart above, we can see that the Nikkei is approaching its resistance at 39,833.65, with a flattening MACD suggesting a potential short-term pullback.
Watch for a breakdown below 39,300, or a breakout above resistance for continued bullish momentum.
In other Asian markets, Australia’s ASX 200 edged higher by 0.12%, and South Korea’s KOSPI gained 0.29%.
The U.S. job report also reshaped expectations around the Federal Reserve’s November meeting. Rate-cut bets for a 50-basis-point reduction fell sharply, with traders now pricing a 95% chance of a 25-basis-point cut, reflecting growing confidence in the resilience of the U.S. economy.
In the bond market, the two-year U.S. Treasury yield rose by 1.7 basis points to reach 3.9488%, marking its highest level in over a month.
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This reflects reduced expectations for aggressive rate cuts and a strong labour market, both of which contribute to higher yields.
Meanwhile, commodity markets faced mixed results. Gold(XAUUSD) edged slightly lower, down by 0.1% to $2,849.29 an ounce, holding near its recent record highs.
The precious metal’s slight decline can be attributed to the increased strength of the U.S. dollar and higher Treasury yields, which dampened demand for safe-haven assets.
Crude oil prices eased from last week’s highs, despite ongoing geopolitical risks in the Middle East.
Brent crude futures fell 65 cents to $77.40 per barrel, while West Texas Intermediate (WTI) declined 53 cents to $73.85 per barrel.
Tensions in the Middle East continue to weigh on the market, but traders are also considering the possibility of stable supply amid these geopolitical risks.
As markets continue to digest the implications of the U.S. labour data and upcoming Federal Reserve decisions, focus remains on how these factors will influence global equity markets and safe-haven demand.
The shift in rate-cut expectations, alongside ongoing geopolitical risks, will likely keep investors on high alert for future market-moving data.
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