October 31, 2024 – By Stella Qiu – Asian markets opened a potentially significant month on a cautious note, with most shares declining and U.S. Treasury yields hovering near three-month highs on Friday. Investors are closely monitoring upcoming U.S. payroll data while anticipating a largely expected interest rate cut next week.
The market is bracing for Friday’s nonfarm payrolls report, which arrives just ahead of Tuesday’s U.S. presidential election and the Federal Reserve’s policy meeting the following day.
Oil prices continued their upward trend, with Brent crude climbing nearly 2% to $74.13 a barrel amid reports of Iran planning a retaliatory strike on Israel from Iraqi territory in the days to come.
In the wake of a market sell-off overnight, Nasdaq futures gained 0.3%, fueled by a remarkable 5.3% surge in Amazon’s stock after hours, adding $104 billion to its market capitalization. The tech giant reported third-quarter profits that exceeded Wall Street expectations, bolstered by strong retail sales.
Intel also surprised the market with optimistic revenue forecasts, resulting in a 7% increase in its shares after the market closed.
In broader Asian markets, MSCI’s index tracking Asia-Pacific shares outside Japan dipped 0.3%, reflecting a 1.9% decline for the week. Tokyo’s Nikkei index fell by 2.1%, weighed down by a stronger yen that raises concerns for Japanese exporters. The yen traded at 152.06 per dollar after gaining approximately 1% overnight, following remarks from Bank of Japan Governor Kazuo Ueda, which suggested the possibility of a year-end rate hike.
Chinese blue-chip stocks edged up by 0.1%, while Hong Kong’s Hang Seng index rose 0.4%, supported by a private survey indicating that China’s factory activity shifted back to expansion in October.
Meanwhile, shares of Meta Platforms, the parent company of Facebook, dropped 4%, and Microsoft fell 6%, despite both firms exceeding earnings expectations. Investor anxiety surrounding the impact of advancing artificial intelligence on their profit margins contributed to the decline.
Unless there is a significant surprise in the U.S. payrolls data, market participants have priced in a 94% likelihood of a quarter-point rate cut by the Fed, following indicators of sustained U.S. consumer health and signs of easing inflation pressures.
Economists predict an increase of 113,000 jobs in October; however, there are upward risks due to strong signals from private sector surveys and lower-than-expected jobless claims. Goldman Sachs anticipates a more modest addition of 95,000 jobs, while TD Securities expects just 70,000.
“October’s job figures may be significantly influenced by disruptions from hurricanes and the Boeing strike, likely leading to substantial distortions in the data. Nonetheless, high-frequency metrics suggest a slower hiring pace compared to September,” noted analysts at TD Securities.
In the foreign exchange markets, the British pound remained close to a two-and-a-half-month low at $1.2891, while British bond yields surged as market participants anticipated that the UK government’s new budget would elevate inflation and slow the Bank of England’s interest rate cuts.
U.S. Treasury yields remained elevated near three-month highs, with two-year yields rising 7 basis points this week to 4.1702%, slightly below their recent peak of 4.2180%. The benchmark 10-year yield increased 5 basis points this week, reaching 4.2840%.
Gold prices experienced a 1.5% decline overnight, stabilizing at $2,745.69 an ounce.
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