Asian stocks started Monday on a firm footing. Japan's Nikkei 225 rose 2% in early trade to 69,651, led by electronics and machinery shares — Advantest gained 4.0% and Mitsubishi Heavy Industries 2.5%. Australian stocks added 0.5% and MSCI's broadest index of Asia-Pacific shares outside Japan ticked 0.15% higher. Nasdaq futures advanced 0.3%, S&P 500 futures 0.1%, and European equity futures pointed higher as well.
The rally's direct trigger was Friday's U.S. September jobs report: just 29,000 new payrolls, far below expectations, with July and August revised down by a combined 60,000. The CME FedWatch tool now prices only a 22% chance of an October rate hike, down from 64% a week ago. "The U.S. economy has lost jobs in two out of the nine months year to date, and the risk of further employment losses means that the Fed can't hike another 100 basis points from here," said Jose Torres, senior economist at Interactive Brokers. AMP chief economist Shane Oliver called the report "not too hot, not too cold" — Goldilocks data.
Trading was thin across Asia, with holidays in China, South Korea and Australia's New South Wales; mainland Chinese markets stay closed through October 7 for the Golden Week holiday. Markets were left to take their cue from Wall Street's Friday moves. The dollar edged lower and bonds steadied: the 10-year Treasury yield, which hit 5.34% on Thursday — its highest since 2002 and its biggest quarterly rise in 32 years — retreated Friday and held near 5.25% in Asian hours.
Bond-market risk has not gone away. "We could see further spikes in yields," said Grace Tam, deputy chief investment officer for Asia at BNP Paribas Wealth Management. "That could tighten financial conditions. That doesn't bode well for risk assets, especially equities." Vincent Chung, a fixed-income portfolio manager at T. Rowe Price, said the Fed's decision to drop forward guidance was contributing to rate volatility. The bond selloff has dealt a fresh blow to housing: the average U.S. 30-year fixed mortgage rate hit 7.28% on Thursday, up 25 basis points in a week — the biggest weekly jump in four years — weeks before the midterm elections.
More catalysts lie ahead: Chinese and Korean markets return after the holidays, restoring liquidity; on Wednesday at 2 p.m. Eastern the Fed releases minutes from its September meeting, which traders will parse for how officials are balancing inflation against employment; and Samsung Electronics' early-October earnings guidance will test AI-hardware demand. Analysts caution the equity rebound stays fragile if long-term yields resume climbing or energy prices rebound.