Asian Equities Surge on Positive US Data, Easing Valuation Concerns
Asian shares experienced an uptick on Thursday, recovering from a significant selloff in the prior session, as stronger-than-anticipated US economic data attracted investors back into markets that are trading close to record highs. Yields on US Treasuries maintained their overnight gains as traders reduced expectations for a Federal Reserve rate cut next month, which consequently supported the dollar near a five-month peak. Data on Wednesday revealed that the US services sector activity surged to an eight-month high in October, driven by a robust increase in new orders. Additionally, private payrolls experienced a rise of 42,000 last month, surpassing expectations. “We actually are not too worried about the job market,” said Keiko Kondo. “The market is tight; companies are likely investing more in technology, probably not necessarily hiring more people, but also not letting people go.” It seems that the dynamics of the economy and the labor market are undergoing some changes.
That contributed to a rise on market overnight as concerns regarding inflated technology stock valuations eased, and positive company earnings rekindled investors’ willingness to take risks. In Asia, Japan’s Nikkei rose by 1.5 percent following a decline of 2.5 percent on Wednesday. South Korea’s Kospi surged over 2 percent shortly after the market opened, recovering from a decline of 2.85 percent in the previous session. MSCI’s broadest index of Asia-Pacific shares outside Japan experienced an increase of 0.32 per cent. On Wednesday, stock markets in Asia experienced a significant selloff, driven by worries over inflated valuations that unsettled investors. However, the majority maintained that the downturn was not a reason for alarm. “I think the market is still quite healthy, but at the same time, it was definitely due for a bit of a pullback,” said Kondo. Nasdaq futures declined by 0.25 percent, and S&P 500 futures slipped by 0.12 percent, relinquishing a portion of their overnight cash session gains. EUROSTOXX 50 futures experienced a slight decline of 0.05 per cent. DAX futures increased by 0.02 percent.
On the tariff front, US Supreme Court justices expressed skepticism on Wednesday regarding the legality of President Donald Trump’s extensive tariffs, in a case that carries significant implications for the global economy and serves as a crucial examination of Trump’s authority. The 10-year US Treasury yield was last recorded at 4.1474 percent, reflecting an increase of nearly seven basis points in the prior session, while the two-year yield was noted at 3.6192 percent. The US Treasury Department announced on Wednesday that it anticipates maintaining its nominal coupon and floating rate note auction sizes steady for at least the next several quarters, while also beginning to contemplate future increases, contributing to upward pressure on long-term yields. The increased yields provided some backing for the dollar, which experienced a slight decline on Thursday but remained close to a peak not seen in over five months reached in the prior session. Wednesday’s positive US economic data releases have resulted in traders adjusting their expectations, now pricing in a roughly 60 per cent chance of a Fed cut in December, a decrease from about 70 per cent earlier in the week.
“The odds of a December Fed funds rate cut are drifting further south,” stated Jose Torres. “The anticipation of the awaited economic updates, which have been reduced in frequency due to the extended government shutdown, is also supporting the greenback’s climb.” In relation to the yen, the dollar experienced a decline of 0.15 percent, settling at 153.86. The euro increased by 0.11 percent, reaching $1.1507. Sterling increased by 0.07 percent to $1.3061, in anticipation of the Bank of England’s rate decision later today. In commodities, oil prices experienced a modest increase, with Brent crude futures rising by 0.05 percent to $63.55 a barrel, while US crude saw a slight uptick of 0.08 percent, reaching $59.65 per barrel. Spot gold decreased by 0.3 percent, reaching $3,969.30 an ounce.
