Asia’s stock markets kicked off the fourth quarter with a reserved stance due to the holiday season, while the dollar maintained its strength, and a last-minute deal to avert a U.S. government shutdown boosted S&P 500 futures.
Key markets like India, Hong Kong, and China were closed for the holiday, affecting overall trading activity.
In Japan, the Nikkei initially surged by as much as 1.7% before settling flat mid-afternoon, paralleled by a weakening yen, which came close to 150 per dollar. The yen depreciation is favorable for exporters as it affects the pricing of their foreign earnings in yen.
Аn eleventh-hour agreement was reached to prevent a U.S. government shutdown, positively impacting the market and lifting U.S. stock futures by 0.5% in Asia.
The stopgap funding bill extends the government’s operational functionality until Nov. 17, allowing crucial data releases, including the monthly payroll report, to proceed on time.
European futures also experienced a boost, rising by 0.2%. However, analysts caution that the shutdown risks are merely delayed, not eliminated, underscoring the need to monitor future developments and their potential impact on market dynamics.
Japanese stocks were additionally bolstered by the Bank of Japan’s quarterly Tankan survey, which indicated an improvement in business sentiment. Despite this, MSCI’s broadest index of Asia-Pacific shares outside Japan remained relatively flat.
The foreign exchange and bond markets remain influenced by the anticipation of sustained high U.S. interest rates.
Japanese bond selling prompted a response from the central bank, leading to a rise in benchmark 10-year Japanese government bond yields, reaching their highest point in a decade at 0.775%.
The dollar maintained its strength in the currency markets, particularly against the yen, where it reached its highest level since last October.
This resilience is attributed to the relative growth resilience in the U.S. and a hawkish Fed policy. However, the focus remains on U.S. data, as any significant signs of softening could impact the dollar’s standing.
Mixed China factory surveys and the anticipation of unchanged rate settings in central bank meetings in the coming days kept pressure on the Australian and New Zealand dollars.
Crude oil prices stabilized following declines earlier in the week, with Brent and West Texas Intermediate crude futures showing minor gains.