Markets are looking at potential US ‘no-land’

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

Asian trading opens on Monday with the macro and global market landscape suddenly looking very different from Friday, thanks to a set of US employment numbers that even the most optimistic of forecasters did not expect.

Friday’s non-farm payrolls report for September was unequivocally strong on all fronts and calls into question the projected path for US interest rates that investors – and perhaps the Fed – have begun to set.

The immediate shift in US rate futures markets is clear – a 50 basis point rate cut next month is now completely off the table and implied prices are now aligned with Fed Chair Jerome Powell’s base case of quarter point reduction on each of the following. two meetings.

Not only that, the total amount of the Fed’s expected rate cuts over the easing cycle has also been reduced, pointing to a higher projected “terminal” rate in 2026 of around 3.25%. Traders could continue to push higher this week.

Soft landing? That might apply to inflation, which still appears to be cooling toward the Fed’s 2% target, but not to the economy. With a labor market this hot, a “no-land” scenario seems more likely than a soft landing.

The details of the report’s headline are repeated – the 254,000 payrolls figure was higher than all 73 forecasts in a Reuters poll of economists, and only three of 56 respondents accurately predicted the jobless rate falling to 4.1%.

The US dollar, bond yields and stocks rose on Friday, reflecting a broad vote of investor confidence in the US economy.

The dollar index rose more than 2% for the week, its best week in two years; Brent crude futures rose 9% weekly for best week since January 2023; and the Dow ended at a record closing high.

Revived animal spirits should boost investor sentiment in Asia on Monday, with Nikkei futures pointing to a rise of about 2.5 percent at the open in Japan. However, tighter financial conditions through notable increases in Treasury yields, the dollar and oil warrant caution.

Monday’s Asian calendar sees the release of Thailand’s September inflation figures. Headline annual inflation is expected to be 0.8%, well up from August’s reading.

Thailand’s inflation target range is 1% to 3%, and inflation has fallen below this lower band every month since April last year except for May this year.

The finance minister and central bank governor met last week and will meet later this month to discuss the inflation target. The central bank has resisted repeated calls from the government to cut interest rates.

The story continues

Here are the key developments that could provide more direction for Asian markets on Monday:

– Inflation in Thailand (September)

– China’s foreign exchange reserves (September)

– Japan’s foreign exchange reserves (September)

(Reporting by Jamie McGeever)