Markets in South Korea and Japan, hit all-time peaks, lifted by the technology sector. That lifted MSCI’s broadest index of Asia-Pacific shares to another record. The index was 0.7% higher, taking its gains in the first six weeks of the year to about 13%.
Japanese shares have been on a tear since Prime Minister Sanae Takaichi’s resounding election victory over the weekend on a campaign of increased economic stimulus. The yen has rallied 2.7% this week and was fetching 153.01 per dollar in afternoon trade on hopes that Takaichi will be fiscally responsible after her big win.
European futures STXEc1 pointed to a strong opening as investors continue to assess the corporate health of the region in the ongoing earnings season.
Investor focus this week is on a batch of US economic reports with the data on Wednesday showing job growth unexpectedly accelerated in January while the unemployment rate eased a touch, signalling labour market stability that could encourage the Federal Reserve to leave rates unchanged in the near term.
Thomas Mathews, head of markets for Asia-Pacific at Capital Economics, said the big picture is that labour market conditions may be tightening at this point. “If so, investors may be overestimating the case for further easing, and Treasuries could be in for a bit more pain.”
Market expectations for a Fed cut of at least 25 basis points at the central bank’s March meeting had risen to about 20% before the jobs data, but retreated after the jobs report and were last at about 5%, according to CME’s FedWatch Tool. Traders are still pricing at least two rate cuts this year.
The two-year US Treasury yield, which typically moves in step with interest rate expectations for the Fed, was at 3.505% after jumping 5.8 basis points in the previous session, its biggest one-day gain since late October.
The elevated yields helped support the under-pressure dollar, which rebounded a bit against most currencies. Analysts, though, point out that uncertainties on Fed independence and policy risks suggest that the dollar will need more such positive surprises in data to sustain the rebound.
“Improving global growth prospects and the continued outperformance of non‑US equities keep the case for USD weakness,” OCBC strategists said in a note.
Inflation data is due on Friday and will be the next test for market views on interest rate cuts.
The yen was an outlier amid dollar strength as it firmed again with investors suspecting the big election mandate could lead the government to be fiscally responsible as it eliminates the need for negotiations with opposition parties.
“Yen shorts are collectively reassessing positions, although at this stage the bearish trend in Yen that started in early 2025 looks more like a reversion to the mean than the start of a structural bull market,” said Chris Weston, head of research at Pepperstone.
“That said, traders need to stay open-minded as the macro picture evolves and where the market decides where it ultimately wants to take Yen.”
In commodities, oil prices extended their gains as investors worried about escalating tensions between Iran and the US.
Brent crude oil futures LCOc1 were 0.4% higher at US$69.70 a barrel. US West Texas Intermediate crude CLc1 rose 0.46% to US$64.93 per barrel.
Spot gold was down 0.44% at US$5,058.49 after rising over 1% in the previous session.