US interest rates rebound, stocks back down

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

Short-lived belief that the Fed would remain on an accommodative path evaporated after Friday’s bet-sapping payrolls number, Monday’s Treasury yields rising above 4 percent and traders pitching in a small chance that November will produce no rate cut at all. rate.

The Fed’s rethink has cooled the jets on Wall Street, but the prospect of the US economy avoiding a recession should not be an impediment to Asia’s recovery. It will give mainland Chinese investors a new international backdrop when they return from the Golden Week holiday on Tuesday and consider last month’s market rescue with rested eyes.

Beijing has applied its most aggressive stimulus measures since the COVID-19 pandemic in an attempt to revive the Chinese economy, and traders and investors are now looking for signs that the medicine is working.

Yields on the 10-year and two-year notes extended a rise to their highest since late July and mid-August, respectively, as food fund futures realigned to an 85% chance of cut by a quarter of a point in November and a 15% chance the Fed holds its hand at its next meeting.

Just a week ago, some resisted the Fed repeating September’s 50 basis point rate cut at next month’s meeting. The resilient labor market encouraged the Fed to lean into the driver, sending the S&P 500 down nearly a percent.

It didn’t do much for the dollar, which consolidated last week’s gains, ending slightly lower against the yen and Swiss franc. Overall, along with the two safe-haven currencies, the dollar held a bid as heightened tensions in the Middle East threatened to spill over into a wider conflict on the anniversary of the Hamas attack on Israel that sparked the Gaza war.

The dollar fell about half a percent against the yen after rising above 149 overnight to its highest level since Aug. 15.

The yen’s weakness helped Japan’s Nikkei slide nearly 2 percent on Monday, leading a broader rally across the region.

MSCI’s broadest index of Asia-Pacific shares rose nearly 1 percent, and its Asia ex-Japan index rose nearly half a percent.

Here are the key developments that could provide more direction to the markets on Tuesday:

– Australian Consumer Sentiment (Oct)

– Japan Tankan Manufacturing and Services Indices (Oct.)

– Taiwan Trade Balance (September)

– US 3 Year Banknote Auction

(Reporting by Alden Bentley in New York; Editing by Bill Berkrot)