Market Overview
Asian markets generally posted gains on 30-SEP-26, led by Australia and Japan, following softer-than-expected inflation data from Australia. This development eased fears of aggressive monetary tightening by the Reserve Bank of Australia (RBA). A modest retreat in global bond yields from recent highs and a softening in oil prices further contributed to a supportive environment for risk assets across the region. Entering the European session, markets are poised for a positive open, building on Asian momentum. This comes despite earlier pressure on US equities from elevated Treasury yields, which was partially offset by more dovish commentary from a Federal Reserve official.
Markets
The S&P/ASX 200 (^AXJO) closed at 8,789.30, up 0.92%, leading gains in Australia. Japan’s Nikkei 225 (^N225) also performed strongly, closing at 66,753.72, a rise of 1.94%. In contrast, South Korea’s KOSPI (^KS11) bucked the trend, closing down 0.48% at 6,838.04.
In active trading, Hong Kong’s Hang Seng Index (^HSI) was up 0.34% at 24,606.84, reversing earlier losses, while the Shanghai Composite (000001.SS) closed up 0.31% at 3,842.19.
European indices were tracking higher at the time of writing, with Germany’s DAX (^GDAXI) trading at 25,522.15, up 0.48%, and the FTSE 100 (^FTSE) trading at 10,706.74, up 0.66%.
In commodities, Brent Crude (BZ=F) was trading at $95.49, down 6.92%. The Australian Dollar (AUDUSD=X) extended losses to a fresh two-month low, trading at 0.6979, down 0.53%.
US Treasury yields saw slight movements, with the US 10-Year Treasury Yield (^TNX) trading at 5.255%, up 1.50 bp, and the US 30-Year Treasury Yield (^TYX) trading at 5.594%, up 3.30 bp.
What Drove Markets
Australian Inflation & RBA Policy Shift
Australia’s August inflation data emerged as a key market driver. The consumer price index picked up to 4% year-on-year, up from 3.5% in July, but the monthly headline CPI came in at 0.4%, down from 1% in the previous period. This figure remained well above the Reserve Bank of Australia’s 2%-3% target band. This figure was notably lower than the market consensus of 4.1% for the 12 months to August. Coupled with an increase in Australian unemployment to 4.6% and a “dovish tone” from the Reserve Bank of Australia (RBA) after its rate hike to a 15-year high of 4.6% on Tuesday, traders slashed the probability of a November RBA rate rise to 20%, down from 38% before the data, suggesting that market expectations for the peak cash rate may have topped out. This spurred a significant rally in Australia, particularly in rate-sensitive real estate and consumer discretionary sectors. Consequently, the Australian dollar shed 2.8% this month, marking its biggest drop since June, and was trading at 0.6979, down 0.53% for the day. Australian three-year bond yields fell 8 basis points to 4.89%, while 10-year bond yields lost 4 basis points to 5.34%.
Global Bond Yields & US Federal Reserve Outlook
Global bond yields experienced a slight retreat in Asian trading, providing some support to risk assets. This followed a Tuesday session where the US 30-year Treasury yield crossed 5.6%, reaching 5.6206%—levels not seen since June 2002. The 10-year yield scaled to a fresh 2007 high near 5.3% on Tuesday, previously pressuring US equities. New York Federal Reserve President John Williams commented that there was no need for urgency regarding interest rates, and time remained to gather more information before the Fed’s October meeting, which helped ease fears of higher central bank rates. This reduced the probability of a quarter-point hike next month to 49% from 71%. Attention will turn to the August Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, due later Wednesday. Economists polled by Dow Jones expect the metric to rise 0.3% for the month, leading to an annual pace of 3.7%, which would remain well above the central bank’s 2% annual inflation target.
Commodities
While Brent crude was largely steady around $103 a barrel in Asian trading following a sharp fall on Tuesday, with signs of recovering Saudi exports and increased use of alternative supply routes offered some relief, it later declined significantly. It was trading at $95.49, down 6.92% for the day.
Asian Economic Indicators
Japan’s industrial production unexpectedly fell 1.7% in August from July, marking a second consecutive monthly contraction and adding to signs of weakness in the manufacturing sector. In contrast, China’s official manufacturing purchasing managers’ index returned to expansion territory, and the non-manufacturing PMI also strengthened. The private RatingDog manufacturing PMI rose to a five-month high.
Stocks to Watch
SoftBank Group (9984.T) jumped 6.55% to 6,430.00, significantly lifting the broader TOPIX index in Japan.
In other corporate developments, Commonwealth Bank increased home loan variable rates by 0.25pc, and Treasury Wines sold its small Tollana brand. S&P also placed four Metrics fund ratings on watch.