S&P 500 — US Large Cap Index
FTSE 100 — UK Blue Chips
Euro Stoxx 50 — Eurozone Leaders
DAX 40 — German Equities
CAC 40 — French Market Index
Nikkei 225 — Japan Benchmark
Hang Seng — Hong Kong Index
Shanghai Composite — China Mainland
ASX 200 — Australian Market
TSX Composite — Canada Index
Nifty 50 — India Large Cap
STI Index — Singapore Market
KOSPI — South Korea Index
Bovespa — Brazil Equities
JSE Top 40 — South Africa Index
IPC Index — Mexico Market
- Japanese holiday keeps trading light, while the BoJ is expected to hold rates steady in October.
- Softening US consumer sentiment and cooling Fed rate hike expectations weigh on the US Dollar.
- Resurfacing Middle East tensions add broader macroeconomic uncertainty, keeping traders cautious ahead of key US inflation data.
USD/JPY depreciates after registering modest gains in the previous trading day, hovering around 158.10 during Asian hours on Monday. The pair may see limited movement due to thin trading conditions as Japanese markets are closed for the Sports Day public holiday.
Ahead of the Bank of Japan (BoJ) October 29–30 meeting, policymakers will review additional third-quarter data expected to show resilient exports alongside elevated costs for businesses and households. However, a back-to-back interest rate increase is unlikely following their September hike.
BoJ Governor Kazuo Ueda noted that rapid tightening paces were typically seen in North America and Europe during 2022 following pandemic-related supply chain disruptions and a strong demand recovery. Market participants currently anticipate the central bank will raise the overnight interest rate target to 1.50% from 1.25% in December or January, marking the seventh increase in this cycle, before potentially raising it further to 1.75% in March or April.
Meanwhile, the USD/JPY pair lost ground as the US Dollar (USD) faced headwinds from softening domestic economic sentiment. The University of Michigan’s Consumer Sentiment Index dropped to 46.3 in October from 48.1 in September, falling short of the market expectation of 47.6. Investors are now looking ahead to key inflation metrics, with the September Consumer Price Index (CPI) and Producer Price Index (PPI) scheduled for release on Wednesday and Thursday.
Monetary policy expectations for the Federal Reserve (Fed) remain cautious, with CME FedWatch indicating only a 17.7% chance of a rate hike of at least 25 basis points this month, down from 24.4% a week prior. Conversely, market participants are pricing in an 84.1% probability of a hike at the Fed’s December meeting. Adding to broader macro uncertainty, energy market concerns resurfaced after US President Donald Trump indicated he was considering joining Saudi Arabia in its campaign against Iran-backed Houthi militants in Yemen following another deadly attack on Riyadh’s international airport.
Higher US real yields underscore growth and rate expectations
Nordea’s Sara Midtgaard notes that the “recent rise in US Treasury yields has largely reflected higher expected short-term real rate, rather than a large increase in the term premium.” She explains that “real yields are the returns investors require after accounting for inflation” and points out that they “tend to rise when markets expect stronger real growth or a higher path for real interest rates,” underlining how the latest move in yields is being driven more by shifting growth and policy expectations than by a repricing of longer-term risk.
