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The yield on the 10-year US Treasury held at 4% on Wednesday, hovering near its highest levels in over two months as investors awaited minutes of the Federal Reserve’s last meeting to gain fresh insights on the monetary policy path. Markets also look forward to the September Consumer Price Index report on Thursday that could influence the trajectory of Fed rate cuts. Last week, a stronger-than-expected US jobs report prompted traders to price out any chances of another jumbo 50 basis point rate cut in November. Data on Friday showed that the US economy added 254,000 jobs last month, soaring past expectations for a 140,000 increase, while the unemployment rate unexpectedly fell to 4.1% from 4.2%. Markets now see about an 85% probability of a more modest 25 bps reduction and 15% odds of no change in policy.

US 10-Year Yield Holds Steady Ahead of Fed Minutes

Stocks in Hong Kong plunged 283 points, or 1.4%, to 20,634 in early deals on Wednesday, following a 9.4% drop the day before, as investors continued to move away from riskier assets after China’s economic planner offered no major fiscal stimulus during Tuesday’s media briefing. All sectors suffered steep losses amid an extended slump in the mainland markets, with activity resuming in China on Tuesday after a week-long break. Meanwhile, US futures were modestly lower following a winning session overnight on Wall Street.

Hong Kong Equities for Second Session

The Reuters Tankan sentiment index for manufacturers in Japan rose to +7 in October 2024 from +4 in September as firms became more confident about business conditions, although lingering uncertainty about China’s economic recovery continued to weigh on sentiment. Most Japanese sectors reported improvements in business confidence, with chemicals and food leading the gains.  A chemicals maker manager cited “a stronger-than-expected rebound in the electronics materials sector," while a manager at an electronics maker said that business has been particularly strong for memory chip makers. Looking ahead, manufacturers expect business conditions to improve further, with a reading of +9 seen over the next three months. Meanwhile, the index for service-sector firms eased in October but is expected to rebound in January. The monthly Reuters poll is a leading indicator for the Bank of Japan’s quarterly tankan business survey.

Japan Manufacturers’ Mood Rises in October

Gold held around $2,620 per ounce on Wednesday, hovering at its lowest level in over two weeks, amid ongoing strength in the US dollar as markets scaled back expectations for a larger rate cut by the Federal Reserve. This followed better-than-expected US jobs data that eased concerns about a slowing labor market. Markets are currently pricing in an 89% probability that the Fed will implement a modest 25 basis point rate cut in November. Investors are now awaiting the FOMC minutes later in the day, followed by key CPI data on Wednesday and PPI figures on Friday for further monetary policy signals. Gold prices were also pressured following a briefing from China, a top consumer, on Tuesday, which provided few specifics on additional stimulus measures. Nevertheless, gold's safe-haven appeal remains supported by fears of a broader conflict in the Middle East.

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