The dominant influence on Asia-Pacific markets was the combination of elevated government bond yields, rising oil prices and uncertainty over the direction of US monetary policy. Investors were also monitoring geopolitical tensions in the Middle East and the implications for inflation, corporate costs and global economic growth.
A weaker-than-expected US employment report, released on Friday, provided some relief to equity investors by reducing expectations of another immediate Federal Reserve interest-rate increase. US non-farm payrolls increased by just 29,000 in September, well below economists’ expectations of 90,000. Nevertheless, longer-term bond yields remained elevated, reflecting concerns about inflation, government borrowing and energy prices.
The prospect of higher borrowing costs continued to weigh on equities, particularly technology companies whose valuations depend heavily on expectations of future earnings. Rising oil prices added another complication, potentially increasing transportation and manufacturing expenses while reducing consumers’ disposable income.
Japan and Hong Kong suffer losses
Japan’s Nikkei 225 fell 0.9% on Friday to close at 68,309.46, while the broader TOPIX index declined 1.1%. The losses reflected renewed caution over rising global bond yields and uncertainty surrounding the outlook for interest rates.
Japan’s financial markets remain sensitive to movements in international bond yields and currency markets. Higher US yields can influence the relative attractiveness of Japanese assets, while movements in the yen affect the overseas earnings of exporters. For Japanese manufacturers, a weaker yen can improve the translated value of overseas revenue, although it also increases the cost of imported energy and raw materials.
Hong Kong was among the region’s weakest major markets at the end of the week. The Hang Seng Index fell 2.6% on Friday to 23,972.29, while technology shares were particularly vulnerable to concerns about financing costs and the global economic outlook. The technology-heavy Hang Seng TECH index had been reported down 2.5% during Friday’s trading.
Hong Kong’s performance also reflected continuing uncertainty about China’s economic recovery. Investors are weighing the potential benefits of government stimulus against weak property-market conditions, cautious consumer spending and questions about the sustainability of corporate earnings growth.
Mainland China: stimulus hopes meet holiday caution
Mainland Chinese equities entered the week with renewed attention on government efforts to support economic activity and stabilise the property sector.
On Tuesday, 29 September, the CSI 300 index gained 0.1%, while the Shanghai Composite rose 0.2%. The gains followed a government pledge to strengthen counter-cyclical policy support. Property developers advanced after authorities reiterated their commitment to stabilising the housing market, with China Vanke rising 10% that day.
However, trading volumes were subdued ahead of China’s National Day holiday, which began on 1 October. Mainland exchanges were closed during the remainder of the week, limiting opportunities for investors to respond to international developments.
The property sector remains central to China’s domestic economic outlook.
Further housing support could improve sentiment, but investors will be looking for evidence that policy measures translate into stronger property sales, improved confidence and more sustainable household spending.
For international investors, the distinction between government announcements and measurable improvements in economic activity remains important. Stimulus can support share prices in the short term, but a durable recovery requires stronger underlying demand and corporate profitability.
Mixed performance elsewhere in Asia
Other Asian markets produced a mixed picture on Friday. Taiwan’s Taiex rose 0.3% to 48,475.74, while South Korea’s Kospi advanced 0.6% to 7,003.74. In contrast, Singapore’s Straits Times Index fell 0.6% to 5,634.82. Indonesia’s market also weakened, with its benchmark index down approximately 0.6%.
Asia Staggers into Weekend
The different performances underline the importance of national economic conditions and sector composition.
Taiwan and South Korea have significant exposure to the semiconductor and technology supply chains, leaving their markets sensitive to global demand for computing equipment, artificial intelligence infrastructure and electronics.
Singapore’s market, meanwhile, has substantial exposure to financial institutions, property and regional business activity. Higher interest rates can support bank lending margins under some conditions, but they can also weaken credit demand and increase financing pressures for households and companies.
Across the region, investors continued to balance opportunities in technology and industrial production against risks from energy prices, financing costs and slower global demand.
Australia rebounds after a difficult session
With the headline economic news being the Reserve Bank of Australia’s lifting of the cash interest rate to 4.60 per cent, Australia’s share market experienced pronounced volatility, finishing the week with a rebound after a substantial sell-off on Thursday.
The S&P/ASX 200 gained 67.70 points, or 0.79%, on Friday to close at 8,682.10. The All Ordinaries rose 0.69% to 8,854.70. Friday’s recovery followed a decline of almost 2% on Thursday, which had erased approximately A$50 billion in market value.
Technology stocks helped drive the recovery. WiseTech Global gained 6.67%, TechnologyOne advanced 4.45% and Xero rose 4.59%. Australia’s major banks also finished higher, with National Australia Bank gaining 1.61%, Commonwealth Bank rising 1.16% and Westpac advancing 1.24%.
Mining shares benefited from firmer copper prices, although the outlook for bulk commodities remained more challenging. Iron ore was quoted at US$92.25 a tonne in Friday morning’s Australian market snapshot, down 1.3%. The Australian dollar traded at approximately US69.3 cents early on Friday.
Energy stocks received support from rising crude prices. Brent crude was quoted at US$102.83 a barrel early Friday, up 4.9%, amid heightened geopolitical concerns. Higher oil prices can benefit Australian energy producers, including companies with substantial petroleum operations, but they also threaten to increase fuel costs and inflation across the broader economy.
The recovery in Australian equities was a reprieve rather than a resolution of the week’s concerns.
Investors remained exposed to fluctuations in global bond yields, commodity prices and expectations for interest rates.
Commodities and the outlook
Gold was quoted at approximately US$4,177 an ounce in Friday morning’s Australian market snapshot, up 0.5% at that point. Its performance reflected continuing demand for defensive assets amid geopolitical and financial uncertainty, although gold prices remained sensitive to movements in bond yields and the US dollar.
Looking ahead, the direction of Asian and Australian markets will depend on whether bond yields stabilise, energy prices moderate and China’s policy support begins to translate into stronger economic activity.
The coming sessions will also test investors’ interpretation of the latest US employment data. Slower job growth may reduce immediate pressure for further monetary tightening, but persistent inflation and higher energy costs could limit the scope for interest-rate relief.
Overall, the week ending 2 October was characterised by volatility, uneven regional performance and continued sensitivity to global economic risks. Australia’s Friday rebound and gains in Taiwan and South Korea offered some counterpoints to losses in Japan and Hong Kong. Yet the broader message was that investors remained cautious, with bond yields, oil prices and China’s recovery likely to remain central influences on Asia-Pacific financial markets.
