Written by Jamie McGeever
(Reuters) – Future outlook for the Asian market.
Asian trading opens on Monday, with global macro and market conditions suddenly looking very different from what they were on Friday, thanks to a set of US jobs numbers that even the most bullish forecasters weren’t expecting. .
The September nonfarm jobs report released Friday was clearly positive on all fronts, casting doubt on the expected path for U.S. interest rates, which were beginning to calm down for investors and perhaps the Fed as well.
The immediate changes in the US interest rate futures market are clear. Next month’s 50 basis point rate cut is completely off the table, with implicit pricing consistent with Fed Chairman Powell’s baseline case for the next monthly rate cut. 2 meetings.
Not only that, but the total amount of Fed rate cuts expected during the easing cycle has been reduced, with the “final” rate expected to be higher in 2026 at about 3.25%. Traders could push the level further this week.
Soft landing? While this may be true for inflation, which still appears to be cooling towards the Fed's 2% target, it is not true for the economy. With a labor market this hot, a “no-landing” scenario rather than a soft landing seems more likely.
To reiterate the report’s headline details, the 254,000 jobs figure exceeds all 73 forecasts in a Reuters poll of economists, pushing the unemployment rate to 4.1%. Only 3 out of 56 respondents correctly predicted a decline.
The U.S. dollar, bond yields and stock prices all soared on Friday, reflecting a broad vote of investor confidence in the U.S. economy.
The dollar index rose more than 2% this week, its best week in more than two years. Brent crude oil futures rose 9% for the week, the best week since January 2023. And the Dow ended at a record close.
The return of Animal Spirits should boost investor sentiment in Asia on Monday, with Nikkei futures expected to rise about 2.5% on a move by Japan. However, attention should be paid to the tightening of the financial environment due to the remarkable sharp rise in US bond yields, the dollar, and crude oil prices.
On Monday’s Asian calendar, Thailand will release September inflation figures. Headline inflation for the year is expected to be 0.8%, significantly higher than measured in August.
Thailand’s inflation target range is 1% to 3%, and the inflation rate has been below that lower limit every month since April last year, except for May this year.
The finance minister and central bank governor met last week and are expected to discuss inflation targeting later this month. The central bank has resisted repeated calls from the government to cut interest rates.
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Here are the key developments that could give further direction to Asian markets on Monday:
– Thailand Inflation (September)
– China’s foreign exchange reserves (September)
・Domestic foreign exchange reserves (September)
(Report: Jamie McGeever)
