Asian stock markets rallied on Monday as investors digested a dismal U.S. jobs report that bolstered expectations for interest rate cuts by the Federal Reserve. Optimism around lower borrowing costs helped lift equities across the region, even as concerns linger over the credibility of U.S. economic governance.
A wave of “buy-the-dip” sentiment swept through global markets, with futures tracking the S&P 500, Nasdaq, and major European indices bouncing back after Friday’s sharp losses. The renewed risk appetite followed a steep drop in U.S. Treasury yields, as traders priced in aggressive rate cuts by the Fed—starting as early as September.
According to futures markets, there is now an 85% probability of a Fed rate cut next month, with expectations for at least 100 basis points of easing over the coming year.
The catalyst for this shift was a surprisingly weak U.S. payrolls report. Revised figures showed the three-month average for jobs growth plummeting to just 35,000—down sharply from over 230,000 earlier this year. Goldman Sachs analysts noted that the data now aligns with broader indicators suggesting the U.S. economy is growing below potential.
Despite the market rebound, concerns about the independence and reliability of U.S. institutions cast a shadow. President Donald Trump’s decision to fire the head of the Bureau of Labor Statistics has raised questions about the politicisation of economic data. Additionally, news that Trump will soon appoint a new Federal Reserve governor sparked fears that monetary policy could become increasingly influenced by political agendas.
“Both Fed credibility and the integrity of U.S. economic statistics are now under scrutiny,” said Ray Attrill, head of FX research at NAB. “Markets may be pricing in easier monetary policy, but the long-term damage to institutional trust is real.”
Still, traders responded positively to the falling bond yields. The U.S. two-year Treasury yield dropped nearly 25 basis points on Friday, marking its biggest one-day decline since August last year. This move helped stabilise global markets, even as the dollar suffered one of its steepest falls in recent memory.
The dollar index dropped to 98.80, well below last week’s high of 100.25. Against the yen, the greenback edged up to 147.79, recovering slightly after a massive 2.3% slide on Friday. The euro held firm at $1.1574, and sterling hovered at $1.3281 ahead of the Bank of England’s policy meeting, where a rate cut is widely anticipated.
In Asia, the MSCI Asia-Pacific index outside Japan rose 0.7%, buoyed by a 1.1% gain in South Korea. Japan’s Nikkei fell 1.4%, weighed down by yen strength, while Chinese blue chips ended the day flat.
Meanwhile, Wall Street has drawn strength from a strong earnings season. Around two-thirds of S&P 500 companies have reported, with 63% beating expectations. Notable firms due to report this week include Disney, McDonald’s, Caterpillar, and several pharmaceutical giants.
In commodities, gold steadied at $3,357 per ounce after surging more than 2% on Friday. Oil prices continued to slide as OPEC+ agreed to a significant output increase, fully reversing last year’s production cuts. Brent crude dipped to $69.52 a barrel, while U.S. crude slipped to $67.24.
As markets look ahead to more central bank action, the interplay between economic data, politics, and policy credibility will remain a key driver of investor sentiment in the weeks ahead.
