Asian equities opened the week on a firmer footing, with Japan and Taiwan leading gains after a sharp slowdown in US hiring prompted investors to scale back bets on a Federal Reserve rate increase this month. The rebound, however, faces a stern test from US Treasury yields hovering near multi-decade highs and oil prices above $100 a barrel.
Japan's Nikkei 225 jumped 2.5% to climb above 70,000 for the first time in three months, while Taiwan's Taiex advanced roughly 2.6%. MSCI's broad Asia-Pacific index outside Japan rose about 0.9%, though trading volumes were thinner than usual with mainland China and South Korea closed for holidays.
Weak jobs data flips the Fed debate
Friday's US employment report reshaped the near-term rates outlook. Nonfarm payrolls increased by just 29,000 in September, well below the expected 90,000, while July and August figures were revised down by a combined 60,000. The unemployment rate ticked up to 4.2%.
Markets now assign only about a 22% probability to an October Fed hike, down from roughly 64% a week earlier. December remains a different story, with another increase still seen as possible.
That shift matters for Asian growth stocks, which were battered by September's bond selloff. The US 10-year yield eased to around 5.26% on Monday but remains close to levels not seen in decades.
Analysts at Yardeni Research noted that the weak jobs report has largely removed October from the immediate debate, although persistent inflation could still keep another hike in play later this year.
Japan and Taiwan lead the rebound
Japan provided the clearest expression of the relief trade. The Nikkei climbed above 70,000 as Advantest and other electronics and machinery shares rallied, while the broader Topix gained about 1.2%.
Taiwan also outperformed, with TSMC, MediaTek and Delta Electronics helping lift the Taiex roughly 2.6%. That keeps the AI trade at the centre of Asia's equity story even as investors question whether premium semiconductor valuations can coexist with 5%-plus US yields.
Australia's ASX 200 was only modestly higher, while India was poised for a stronger opening after its longest weekly losing streak in 25 years. Nomura analysts told The Wall Street Journal that India's recent correction reflected deeper concerns around long-term growth and valuation, suggesting investors may remain selective even if the rates backdrop improves.
Five percent yields remain the bigger test
Monday's rally is not a clean risk-on signal. The US 10-year yield remains near 5.26%, while the two-year is around 4.8%, levels that still raise financing costs across the region.
Oil is another constraint. Brent slipped about 0.7% to $101.59 and WTI fell towards $90.12 after the G7 agreed to release up to 100 million barrels of emergency crude and diesel stocks over four months. The move eases immediate supply pressure, but Middle East infrastructure risks remain unresolved.
Europe is also feeding volatility into Asia. The euro has fallen to a 17-month low as French fiscal concerns widen the spread over German bonds. UOB economist Lee Sue Ann told The Wall Street Journal that the stress raises the risk of outflows and tighter euro-area financial conditions.
The next test comes quickly. US services data are due Monday, followed by minutes from the Fed's September meeting on Wednesday.
This article is for informational purposes only and does not constitute financial advice.
