(Reuters) – Looking ahead to the day ahead in Asian markets.
Momentary belief that the Fed would stick to a hawkish path evaporated after Friday’s bet-paying numbers, with Treasury yields on Monday backing above 4% and traders presenting a slight chance that November might produce no rate at all.
The Fed has reconsidered and cooled Wall Street’s flights but the chances of the US economy avoiding recession will not have to be a hindrance to the Asian rally. It will give Chinese investors a new international backdrop when they return on Tuesday from the Golden Week holiday and consider redeeming last month’s market with rested eyes.
Beijing has rolled out aggressive stimulus measures since the outbreak of the COVID-19 pandemic in an effort to revive China’s flagging economy, and traders and investors are now looking for signs to see if the medicine is working.
Yields on the 10-year and two-year notes surged to their highest since late July and mid-August, respectively, as fed funds futures rebounded to an 85% chance of a quarterly rate cut in November and a 15% chance that the Fed will pause at its next meeting. .
A few weeks ago, some were adamant that the Fed would repeat September’s 50 bps rate at next month’s meeting. A strong labor market made the case for the Fed leaning hawkish and that lowered the rate to about 1 percent.
It did little for the dollar, which covered last week’s rally, which ended slightly against the yen and Swiss franc. In general, along with those two safe-haven currencies, the dollar held back the bid as tensions in the Middle East threatened to erupt into a wider conflict on the day of the Hamas attack on Israel that sparked the war in Gaza.
The dollar fell about half a percent against the yen after rallying above 149 overnight to its highest since Aug. 15.
The yen’s weakness helped rally nearly 2% on Monday, leading to a broader rally across the region.
MSCI’s broad index of Asia-Pacific shares rose about 1% and its leading Asian index of Japan rose about half a percent.
Here are some key developments that could provide additional guidance for markets on Tuesday:
– Australian consumer sentiment (Oct)
– Japan Tankan production and services indicators (Oct)
– Taiwan’s trade balance (September)
– US 3-year note auction
