Lead: Asian equities climbed on Sept 10 as investors grew more confident the Federal Reserve will cut rates at its Sept 17 meeting, while government bond prices fell. Traders are weighing U.S. labour softness and two upcoming inflation prints — producer and consumer prices — that could confirm the Fed’s path. Risk assets were buoyed by Wall Street record highs, even as geopolitical tensions and central-bank decisions in Europe and Japan added layers of uncertainty. Yields on U.S. Treasuries rose modestly as markets adjusted to a higher probability of easing.
Key takeaways
- Markets assigned about 8.4% odds to a 50bp Fed rate cut on Sept 17, according to the CME FedWatch Tool, with a quarter-point cut viewed as likely.
- S&P 500 futures were up ~0.3% and STOXX 50 futures ~0.2% as Asian trade opened; major U.S. indexes closed at fresh all-time highs overnight.
- Major Asian indexes rose: Japan’s Nikkei +0.8%, South Korea’s KOSPI +1.7%, Taiwan’s TWII up to +1.5% (record high), Hong Kong’s Hang Seng +1.3%, and China’s CSI300 +0.3%.
- U.S. 10-year Treasury yield climbed to 4.088% (+1 basis point); equivalent Japanese government bond yields rose to 1.565% after a five-year debt auction.
- The dollar index eased slightly to 97.707; the euro traded near $1.1715 and the yen around 147.31 per dollar.
- Gold eased to $3,644/oz after hitting $3,673.95 the prior day; Brent crude rose to $67.13/bbl and U.S. WTI to $63.34/bbl amid Middle East tensions.
- U.S. PPI and CPI prints on Wednesday and Thursday are the immediate data hurdles that could reshape Fed cut probabilities.
Background
Markets have rapidly repriced the Federal Reserve’s near-term path after a run of softer-than-expected U.S. labour-market reports. A weaker payrolls print last week reduced the central bank’s room to keep policy tighter, prompting traders to favor rate cuts in September and beyond. The CME FedWatch Tool shows a marked rise in cut probabilities compared with a week earlier, when markets still priced a non-trivial chance of no change.
Global investors are simultaneously navigating renewed geopolitical risks and a packed central-bank calendar. Reports of an Israeli strike targeting Hamas leadership in Qatar and a Russian attack on western Ukraine that prompted Poland to scramble air defences helped underpin oil and safe-haven flows. Meanwhile, major central banks — the ECB on Thursday and the Bank of Japan next Friday — are in focus for policy guidance, with markets parsing mixed reporting on whether the BOJ may move toward tightening later this year.
Main event
Asian equity markets opened higher on Sept 10, taking their cues from Wall Street’s record close the night before. S&P 500 futures rose about 0.3% while STOXX 50 futures gained roughly 0.2%, reflecting broad risk-on positioning. Japan’s Nikkei added 0.8%, South Korea’s KOSPI jumped 1.7%, and Taiwan’s TWII climbed as much as 1.5% to a new high, signaling strong regional momentum.
Safe-haven sovereign bonds sold off as yields pushed up; the U.S. 10-year yield reached 4.088% after a small rise, and equivalent Japanese government bond yields ticked higher to 1.565% following a smooth five-year auction. Traders said the move reflected both a repricing around Fed easing odds and profit-taking after recent bond rallies. The dollar index slipped slightly to 97.707, with the euro at $1.1715 and the yen at 147.31, as currency markets waited for U.S. inflation prints.
Commodity markets showed mixed signals: gold settled lower at $3,644/oz after its record high, while Brent crude and WTI rose about 1.1% amid tensions tied to the Middle East incident and the Russia-Ukraine frontline. Market participants noted that crude’s move reflected both a geopolitical risk premium and technical support following recent gains.
Analysis & implications
The recent succession of weak U.S. labour data has forced markets to confront a higher likelihood of Fed easing, which would loosen financial conditions and support risk assets. If the Fed cuts by 25bp next week, short-term rates would fall but markets are already pricing more aggressive easing later, signaling investor belief that such moves could avert a sharper U.S. slowdown. That view helps explain why equities rallied even as bond yields rose — investors are balancing the prospect of easier policy with the signal of underlying economic softness.
An upside surprise in PPI or CPI this week would complicate that narrative and could quickly unwind some cut probabilities, particularly beyond September. Traders and analysts emphasize that inflation prints will be decisive: a hotter-than-expected reading could delay easing expectations and push bond yields higher, while cooler prints would cement the current market trajectory toward rate cuts.
Internationally, the Fed’s decision and forward guidance will ripple through other central banks’ choices. The ECB is expected to hold rates on Thursday, but resilient euro-area data has narrowed debate about future cuts. In Japan, mixed reporting from major outlets has left markets uncertain about a possible later-year BOJ tightening, which would affect global yield differentials and currency flows.
Comparison & data
| Market | Move (Sept 10) | Recent level |
|---|---|---|
| S&P 500 futures | +0.3% | fresh record closes (overnight) |
| Nikkei | +0.8% | — |
| KOSPI | +1.7% | — |
| TWII | +1.5% (record) | — |
| 10‑yr UST yield | +1 bp | 4.088% |
| Gold | -0.5% | $3,644/oz |
| Brent | +1.1% | $67.13/bbl |
These figures show markets reacting simultaneously to growth and policy signals: equities climbing on easier policy expectations, while bond yields reflect both prospective easing and recent re-pricing dynamics. Commodity moves reflect a mix of risk sentiment and region-specific geopolitical developments.
Reactions & quotes
Market commentators and participants offered quick takes as data and events unfolded.
“An upside inflation surprise could rock the boat slightly and lead to an unwinding of rate-cut probabilities,”
Kyle Rodda, senior markets analyst, Capital.com
Rodda framed the immediate sensitivity of cut odds to incoming price data, stressing that September’s prints could reshape expectations beyond the next meeting.
“Markets are pricing aggressive easing as the most likely path given recent labour weakness,”
Market strategist (commenting to Reuters)
The strategist noted that investors appear to believe easing will be sufficient to avert a U.S. recession, judging by current risk appetite across equities and credit.
“The legal action involving the removal of a Fed governor raises constitutional questions that could ultimately reach the Supreme Court,”
Legal analyst (financial markets specialist)
Observers cautioned that the temporary court block on the removal of a Fed governor introduces political risk around central-bank independence, a factor markets are monitoring closely.
Unconfirmed
- Conflicting press reports on whether the BOJ will tighten policy this year remain unresolved; official BOJ guidance is awaited (unconfirmed).
- Details and full attribution of the reported Israeli strike targeting Hamas leadership in Doha have not been independently verified in all accounts (unconfirmed).
- Whether the court case over the proposed removal of a Fed governor will ultimately reach the U.S. Supreme Court is uncertain at this stage (unconfirmed).
Bottom line
Markets have rapidly shifted to price Fed easing after signs of U.S. labour-market softness, supporting Asian equities while pushing bond prices lower and yields modestly higher. The immediate market hinge is the U.S. PPI and CPI data over the next two days; cooler readings would likely reinforce cut expectations, while hotter prints could reverse some of the recent repricing.
Investors should watch central-bank communications, geopolitical developments and incoming U.S. data together, as the interplay of policy, growth and risk events will determine whether current market positioning holds. For now, traders appear willing to bet that easing will arrive — but that view remains data-dependent and subject to geopolitical and political shocks.