Asian equity markets opened Thursday on the back foot, reflecting a broader global risk‑off mood after a surprisingly soft US inflation report for August. The MSCI Asia‑Pacific Index (ex‑Japan) slipped 0.2%, with South Korea’s KOSPI easing 0.14%. Japan’s Nikkei, however, managed a gain of just over 1% as chip‑related shares rallied.
US inflation data eases rate‑hike bets
Data released on Wednesday showed US consumer price growth in August rose less than analysts had expected, and price pressures in July were also milder than previously reported. The softer numbers prompted traders to trim bets on a Federal Reserve rate increase at its October 28 meeting. According to CME’s FedWatch tool, the market now sees a 38% chance of a hike this month, down from 50% the day before.
New York Fed President John Williams reinforced the view, saying he sees “no urgency” for further tightening. The Fed had raised rates in September – the first increase in three years – and signaled that additional moves could be on the table later in the year.
Bond market pressure persists
US Treasury yields continued their upward trajectory in September, pushing the 10‑year note to 5.306%, the highest level since mid‑June 2007, while the 30‑year yield reached 5.634% after briefly touching 5.6517% – a peak not seen since June 2002. Investors remain focused on whether yields can stay above the psychologically important 5% threshold.
Nomura’s global head of rates sales, Darren Shames, noted that the United States now carries over $40 trillion of debt, adding that the absolute 5% figure is less informative than the rate’s trajectory and velocity, which are drawing the most attention.
Mixed corporate and geopolitical backdrop
Micron Technology’s latest earnings, while confirming strong demand for AI‑driven memory, failed to lift sentiment. Charu Chanana, chief investment strategist at Saxo, said the results underscore a “strong validation of AI and memory demand,” but warned markets may be questioning whether the sector is approaching a peak in memory shortages.
In the Middle East, stalled peace talks between the United States and Iran kept oil prices elevated, adding another layer of uncertainty. Brent crude futures hovered around $98.15 a barrel after a 14% surge in September, marking a third consecutive month of gains.
Currency and regional market moves
The US dollar remained near a two‑month high, buoyed by higher Treasury yields. The euro steadied at $1.1334 after a 2.5% decline last month, while the Japanese yen softened 0.3% to 157.95 per dollar following a 1.5% rise in September.
Some policymakers at the Bank of Japan indicated a willingness to accelerate the pace of future rate hikes, according to a summary of opinions from its September meeting.
What this means for investors
With inflation showing signs of moderation but Treasury yields staying elevated, investors are likely to remain cautious. The mixed macro backdrop – softer US data, persistent high yields, and geopolitical tensions – suggests that the cost of capital will continue to weigh on equity valuations across the region.
Market participants will be watching upcoming US data releases and any further statements from Federal Reserve officials for clues on the trajectory of monetary policy, while Asian investors keep an eye on the evolving AI sector and energy market dynamics.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
