Asian Markets Climb as Fed Hike Bets Fade Oil Prices Rise

Asian stocks advanced on Monday after a weaker-than-expected US jobs report reduced expectations of further interest rate hikes by the Federal Reserve. MSCI’s Asia Pacific equities index climbed 0.4%, with Japanese shares surging 2%. The Nasdaq 100 contracts also rose 0.3%, following a record high on Friday. The softer jobs data, which showed only 29,000 new nonfarm payrolls in September, eased pressure on the Fed, with markets now pricing in less than a 25% chance of an October rate hike.

Oil prices gained ground as Yemen launched an offensive to retake Houthi-controlled areas. Brent crude for December delivery briefly topped $103 a barrel before paring gains. Despite OPEC+ nations agreeing to maintain production quotas, Brent crude still recorded a nearly 5% increase last week. Gold saw little change after its largest weekly loss since June, as higher bond yields countered expectations of a Fed rate hold.

The Brazilian real strengthened as right-wing senator Flávio Bolsonaro led in the first round of Brazil’s presidential race, potentially positioning him as the favorite in the upcoming runoff. Meanwhile, US Treasuries faced continued pressure due to persistent inflation concerns, government spending, and rising corporate borrowing for AI development. The 10-year Treasury yield hit its highest level since 2002 last week.

This week, investors will closely monitor the Fed’s September meeting minutes and upcoming auctions of 10- and 30-year Treasuries. Concerns about potential contagion in Europe’s government bond market also remain, following a recent selloff that stirred memories of the region’s debt crisis. According to Mark Dowding of RBC BlueBay Asset Management, global bond curves have steepened, and market fears of back-to-back central bank rate hikes have slightly eased.