Economy

TOKYO (Reuters) – Asian stocks rallied and the dollar reached a fresh seven-week peak on the yen on Monday after blowout U.S. labour data dispelled fears of a recession and spurred a sharp paring of rate-cut bets.Short-term U.S. Treasury yields rose after the closely watched non-farm payrolls report on Friday showed the economy unexpectedly added the most jobs in six months in September.Crude oil prices eased from a one-month peak even as Israel bombed targets in Lebanon and the Gaza Strip, with Monday marking one year since the Hamas attack that triggered the war.Japan’s Nikkei led regional equity gains with a 2% rally as of 0015 GMT, given additional momentum by the softer yen.Australia’s stock benchmark added 0.12% and South Korea’s Kospi gained 0.29%.Hong Kong’s Hang Seng had yet to open, and mainland Chinese stocks remain closed until Tuesday for the Golden Week holiday.MSCI’s broadest index of Asia-Pacific shares climbed 0.4%.U.S. Dow futures pointed 0.08% higher after the cash index closed at an all-time peak after the payrolls data on Friday.”The reaction in markets conveys what the key themes and risks for market participants are presently: economic growth, and its impact – for equities – on future earnings,” said Kyle Rodda, senior financial market analyst at Capital.com. “There’s also seemingly a revival of the U.S. economic exceptionalism trade.”The U.S. dollar pushed as high as 149.10 yen for the first time since Aug. 16 before last trading hands up 0.18% at 148.87 yen.Japan’s top currency diplomat, Atsushi Mimura, said on Monday that officials will monitor foreign exchange moves, including speculative trading.The euro eased 0.07% to $1.0971, slipping back towards Friday’s seven-week trough at $1.09515.Bets for a super-sized 50-basis-point rate cut at the Federal Reserve’s next policy announcement on Nov. 7 – which had been above 50% a week ago – were completely erased after the payrolls report.Instead, traders now lay 95% odds on a quarter-point cut, with a small chance that the policy rate stays unchanged, according to CME Group’s (NASDAQ:CME) FedWatch Tool.The two-year U.S. Treasury yield rose 1.7 basis points to 3.9488% on Monday, the highest in more than a month.Gold edged 0.1% lower to $2,849.29 an ounce, but remained not far from last month’s record peak of $2,685.42.Crude prices slipped following their biggest weekly gains in more than a year amid the mounting threat of a region-wide war in the Middle East.Brent crude futures lost 65 cents to $77.40 per barrel, while U.S. West Texas Intermediate crude futures declined 53 cents to $73.85 per barrel. More

SINGAPORE (Reuters) – Japan’s yen fell to its lowest in nearly two months and other major currencies too were grappling with losses early on Monday as the dollar extended a rally sparked by Friday’s strong U.S. jobs data and an escalation in the Middle East conflict.The yen fell marginally to hit 149.10, its weakest level since Aug. 16. But that came on top of a more than 4% decline last week, its biggest weekly percentage decline since early 2009.The dollar’s gains followed a U.S. jobs report that showed the biggest jump in jobs in six months in September, a drop in the unemployment rate and solid wage rises, all pointing to a resilient economy and forcing markets to reduce pricing for Federal Reserve rate cuts.”With rate cuts still being the default position, and when married to upbeat earnings expectations and China going hard on liquidity and fiscal, the equity bull case and the U.S. dollar get a shot in the arm,” said Chris Weston, head of research at Australian online broker Pepperstone.”While geopolitical headlines and the possibility of an energy supply shock remain a continued threat to sentiment, those set long of risk haven’t heard anything significantly market moving through the weekend and head into the new trading week feeling pretty good about the prospect of further upside.”In latest developments in the Middle East, Israel bombed Hezbollah targets in Lebanon and the Gaza Strip on Sunday ahead of the one-year anniversary of the Oct. 7 attacks that sparked its war. Israel’s defence minister also declared all options were open for retaliation against arch-enemy Iran. Brent crude oil futures were 0.7% lower on Monday, but rose more than 8% last week, the largest weekly gain since early January 2023. The dollar index measure against major rivals was flat. It rose 0.5% on Friday to a seven-week high, logging more than 2% gains for the week, its biggest in two years. The euro stood at $1.0970, down 0.06%.The yen’s underperformance has also to do with last week’s comments from new prime minister, Shigeru Ishiba, that stoked expectations that rate hikes in Japan are further away.U.S. 10-year Treasury yields were last up a basis point (bps) at 3.9905%, their highest in nearly two months. Yields dipped early last week when investors bought safe-haven Treasuries after Iran launched more than 180 missiles against Israel in escalating geopolitical tensions.Market expectations have swung to the extreme for the Federal Reserve to do just a 25 bps cut in November, rather than 50 bps, following the jobs data. They now price in a 95% chance of a quarter point cut, up from 65% in the middle of last week, and a 5% chance of no cut at all, according to CME’s FedWatch toolSterling was also flat around $1.3122, nursing last week’s 1.9% drop, its steepest fall since early 2023.Bank of England Chief Economist Huw Pill said on Friday the central bank should move only gradually with cutting interest rates, a day after governor Andrew Bailey was quoted as saying the BoE might move more aggressively to lower borrowing costs. More

TOKYO (Reuters) -Japan’s top currency diplomat, Atsushi Mimura, issued on Monday a warning against speculative moves on the foreign exchange market as the yen fell below 149 per dollar.”We will monitor currency market moves including speculative trading with a sense of urgency,” Mimura told reporters, reviving a verbal warning tactic that his predecessor, Masato Kanda, frequently used.Mimura declined to comment on the specifics of the current market situation.The yen depreciated to 149.10 versus the dollar in early trading on Monday, the weakest since Aug. 16, after a surprisingly strong U.S. jobs report for September led traders to cut bets that the Federal Reserve will make further large interest rate cuts.The yen has also been under pressure since new Japanese premier Shigeru Ishiba stunned markets when he said the economy was not ready for further rate hikes, an apparent about-face from his previous support for the Bank of Japan’s unwinding decades of loose monetary policy. More

The Recruitment and Employment Confederation and KPMG said on Monday their measure of growth in starting pay for people hired to permanent roles hit its lowest since February 2021. Its monthly permanent job placements index extended a two-year downturn but the drop in hiring was softer than in August.Jon Holt, KPMG’s UK chief executive and senior partner, said companies faced uncertainty about Britain’s tax and other economic policies ahead of finance minister Rachel Reeves’ inaugural annual budget on Oct. 30.Reeves has warned that some taxes could increase as Prime Minister Keir Starmer’s new Labour government seeks to boost public services and investment.Holt said the easing in pay pressures “could strengthen the case for a further cut in interest rates” at the BoE’s next meeting in November.Last week BoE Governor Andrew Bailey said the central bank could become “a bit more activist” and move more aggressively to cut rates if inflation pressures continued to weaken. But the central bank’s Chief Economist Huw Pill struck a more cautious tone on Friday, saying he preferred a gradual approach. The REC/KPMG survey also showed that the number of available candidates for roles continued to grow, while the number of vacancies fell for the 11th month in a row and at the fastest pace since March. More

The ECB cut rates from record highs twice already this year and markets now expect even quicker policy easing with moves in October and December fully priced in as inflationary pressures are easing faster than policymakers had expected.”Yes, quite probably,” Villeroy told La Repubblica when asked if a cut is coming this month. “In the last two years our main risk was to overshoot our 2% target,” Villeroy was quoted on Monday as saying. “Now we must also pay attention to the opposite risk, of undershooting our objective due to a weak growth and a restrictive monetary policy for too long.”ECB President Christine Lagarde offered the strongest hint yet last week that an October rate cut is coming and policymakers have been lining up behind her since then. Villeroy predicted further cuts in the 3.5% deposit rate next year and said the ECB should be back at the “neutral” rate, which neither slows, nor stimulates growth, sometime in 2025.”If we are next year sustainably at 2% inflation, and with still a sluggish growth outlook in Europe, there won’t be any reason for our monetary policy to remain restrictive, and our rates to be above the neutral rate of interest,” Villeroy said.He did not estimate the neutral rate but said markets put it at around 2%, which would suggest six more cuts until then, including two more this year and four in 2025, if the ECB continued its practice of moving in 25 basis point increments. While oil prices surged last week on turmoil in the Middle East, Villeroy said the ECB tended to look past such shocks, provided they were temporary and not feeding into underlying prices. “The victory against inflation is in sight, but it’s not a reason to become complacent and relax on a preset course,” Villeroy added. More

TOKYO (Reuters) -Bank of Japan Governor Kazuo Ueda’s efforts to lift rock-bottom borrowing costs face fresh challenges as a yen rebound and the new political leadership’s preference for loose monetary policy raise the hurdle for rate hikes.New Japanese premier Shigeru Ishiba stunned markets this week when he said the economy was not ready for further rate hikes, an apparent about-face from his previous support for the BOJ unwinding decades of extreme monetary stimulus.The surprisingly blunt remarks pushed the yen lower against the dollar and cast fresh doubts over how aggressive the BOJ would be in raising rates.While politics is unlikely to derail the longer-term case for rate hikes, analysts say policy deliberations could get bumpy heading into a general election due Oct. 27.”I don’t think the remarks were intended to apply huge pressure on the BOJ. Rather, Ishiba probably had the election in mind,” said Katsuhiro Oshima, chief economist at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley Securities. “He was seen by markets as a hawk, so may have wanted to fine-tune that image a little bit.”The looming election this month means many analysts expect the BOJ will hold off raising rates at its Oct. 30-31 meeting.Ueda was appointed last year by former Prime Minister Fumio Kishida, who stepped down in September and had endorsed the BOJ’s exit from its radical monetary stimulus.The BOJ in March delivered its first rate hike in 17 years, arguing the pace of price and wage increases showed Japan was finally shaking its entrenched deflationary mindset.The bold shift to a tightening bias, however, hit a snag this week with Ishiba’s new cabinet reaffirming with the BOJ a 2013 statement that commits both sides to focus on reflating a stagnant economy.To be sure, pressure for the BOJ to immediately hike rates again this year had already eased ahead of Ishiba taking office, thanks in part to a rebound in the yen off a three-decade low hit in July, which moderates inflationary pressure from import costs.Predicting the political clouds, the BOJ has already laid the groundwork to pause. After keeping rates steady last month, Ueda signaled that the BOJ is in no rush to hike with markets still unstable and U.S. economic uncertainties heightening.”They won’t directly affect monetary policy,” said a source familiar with the BOJ’s thinking, on Ishiba’s remarks. “But there’s also no need for the BOJ to hike rates when so much is going on,” the source said, a view echoed by another source.POLITICAL UNCERTAINTY MAY CONTINUEHaving ended negative interest rates in March and raised them again in July, Ueda said the BOJ would keep lifting rates to levels that neither cool nor overheat growth – seen by analysts as somewhere around 1-1.5% – if the economy moves in line with forecasts.With inflation exceeding 2% for well over two years and a tight labour market pushing up wages, pausing for too long could cause communication problems.However, with the potential for political curve balls heading into the election, the BOJ may use overseas risks, such as a slowing U.S. economy, as an argument for not raising rates straight away.Such a messaging tweak could help avoid market perceptions the BOJ was abandoning its tightening bias altogether.”It’s essential for the BOJ to make efforts to improve its communication to avoid unnecessary confusion with its policy shift,” BOJ board member Asahi Noguchi said on Thursday, in unusually candid remarks acknowledging problems in the way the central bank communicated with markets.There is also uncertainty on whether Ishiba would revert to his endorsement of a BOJ exit once the election is out of the way – as many policymakers and analysts expect.Ishiba’s approval ratings stood at 50.7% in a poll by Kyodo news agency conducted on Oct. 1-2, lower than the debut ratings of the previous three administrations, suggesting a tough battle in the election.While Ishiba’s Liberal Democratic Party (LDP) is likely to stay in power, a significant loss of seats could weaken his standing within the party, and keep him under pressure to heed calls for loose fiscal and monetary policy, analysts say.Depending on this month’s lower house election outcome, political uncertainty may continue until the upper house election set to be held in summer next year.”If Ishiba wins solidly at this month’s election and the political situation stabilises, the BOJ could raise rates in December or January,” said Shigeto Nagai, head of Japan economics at Oxford Economics.”If the political turmoil drags on, that could unravel the BOJ’s strategy to hike rates up to around 0.75% next year,” he said. “At heart, the BOJ probably wants to move swiftly.” More

(Reuters) – A look at the day ahead in Asian markets.Trading in Asia kicks off on Monday with the global macro and market landscape suddenly appearing very different from how it looked on Friday, thanks to a set of U.S. employment figures that not even the most bullish of forecasters expected. The September non-farm payrolls report on Friday was unequivocally strong on all fronts, and throws into doubt the projected path for U.S. interest rates that investors – and perhaps the Fed too – had begun to settle on.The immediate shift in U.S. rate futures markets is clear – a 50 basis point rate cut next month is now completely off the table, and implied pricing is now aligned with Fed Chair Jerome Powell’s baseline case of a quarter-point cut at each of the next two meetings. Not only that, the total amount of expected Fed rate cuts over the easing cycle has also been scaled back, pointing to a higher projected “terminal” rate in 2026 of around 3.25%. Traders could continue to raise that higher this week.Soft landing? This might apply to inflation, which still appears to be cooling towards the Fed’s 2% target, but not to the economy. With a labor market this hot, a ‘no landing’ scenario rather than a soft landing is looking more likely.The headline details of the report bear repeating – the 254,000 payrolls figure was higher than all 73 forecasts in a Reuters poll of economists, and only three out of 56 respondents accurately predicted the unemployment rate falling to 4.1%. The U.S. dollar, bond yields and stocks all leaped higher on Friday, reflecting a broad-based vote of investor confidence in the U.S. economy. The dollar index rose more than 2% on the week, its best week in more than two years; Brent crude oil futures rose 9% on the week for their 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, and Nikkei futures point to a rise of around 2.5% at the open in Japan. However, tighter financial conditions via the notable spikes higher in Treasury yields, the dollar and oil warrant caution. Asia’s calendar on Monday sees the release of September inflation figures from Thailand. Annual headline 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 come in below that lower band every single month since April last year except 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. Here are key developments that could provide more direction to Asian markets on Monday:- Thailand inflation (September)- China FX reserves (September) – Japan FX reserves (September) More

WASHINGTON (Reuters) -SpaceX’s workhorse Falcon 9 rocket can return to flight for a mission planned for Monday to launch the European Space Agency’s Hera spacecraft from Florida, the U.S. Federal Aviation Administration said on Sunday.Elon Musk’s company, which has engaged in a public quarrel with the FAA in recent weeks, said on Sunday it is planning the liftoff for 10:52 a.m. ET (1452 GMT) from Cape Canaveral.”The SpaceX Falcon 9 vehicle is authorized to return to flight only for the planned Hera mission scheduled to launch on Oct. 7 from Cape Canaveral Space Force Station in Florida,” the FAA said on Sunday.The agency said it has “determined that the absence of a second stage reentry for this mission adequately mitigates the primary risk to the public in the event of a reoccurrence of the mishap experienced with the Crew-9 mission.”The FAA on Sept. 30 said SpaceX must investigate why the second stage of its Falcon 9 malfunctioned after a NASA astronaut mission, grounding the launch vehicle for the third time in three months. The malfunction caused the booster to fall into a region of the Pacific Ocean outside of the designated safety zone that the FAA approved for the mission.Hera is set to study the effects of the 2022 impact that NASA’s DART spacecraft had with the asteroid Dimorphos in a test of a planetary defense system – the first time a spacecraft managed to alter the motion of any celestial body. Dimorphos is a moonlet of Didymos, which is defined as a near-Earth asteroid.The Hera mission is expected to provide data for future asteroid deflection missions with an eye toward redirecting objects that could pose a future collision threat for Earth.Falcon 9 launched DART in 2021.The FAA on Sept. 17 proposed fining SpaceX $633,000 for violating agency rules ahead of two 2023 Falcon 9 launches.”They’ve been around 20 years, and I think they need to operate at the highest level of safety,” FAA Administrator Mike Whitaker said on Sept. 24.SpaceX took issue with Whitaker’s comments, saying the company is the “safest, most reliable launch provider in the world, and is absolutely committed to safety in all operations.”Whitaker defended the FAA’s decision to delay a planned September Starship 5 launch, noting that SpaceX failed to complete a timely sonic boom analysis as required. The FAA has said it does not expect a license determination before late November for that launch.Musk has criticized FAA leaders over the agency’s proposed fine and called for Whitaker’s resignation.In February 2023, the FAA proposed a $175,000 penalty against SpaceX for failing to submit some safety data to the agency prior to an August 2022 launch of Starlink satellites. The company paid that penalty. More