Nikkei Rises 2.5% as Weak Hiring Data Cuts October Rate Hike Odds

The Nikkei 225 climbed roughly 2.5% on Monday after disappointing labor figures reduced the probability of an October rate increase to under 25%.

However, the optimism may be short-lived. The 10-year Treasury yield remains around 5.25%, near a level not seen in twenty years, following the Federal Reserve's initial rate increase in three years.

Could Soft Labor Reports Alter Federal Reserve Plans?

September's net hiring totalled 29,000, missing projections and trailing August's 133,000 by a wide margin, according to AP.

Investing.com noted that wage growth decelerated as well, and money markets currently imply a probability below 25% for a rate increase in October.

The employment figures sparked a rally in U.S. equities on Friday. The Nasdaq composite advanced 1.2%, while the S&P 500 finished 0.7% up, just under 1% away from its August record.

Additionally, the Nasdaq 100 closed at a record on Friday, although its futures slipped 0.1% during Asian trading.

The Nikkei briefly surpassed 70,000 earlier in the Tokyo session, a milestone not seen in three months, according to the Associated Press.

Meanwhile, mainland China and South Korea markets remained closed for holidays, and Hong Kong's Hang Seng Index traded around 23,976.

Can Treasuries and Crude Keep the Chip Rally Going?

During afternoon trade, Tokyo Electron, which supplies chipmaking equipment, added 5.2%, and technology investor SoftBank Group rose 3.1%.

Taiwan Semiconductor Manufacturing Co. (TSMC) gained roughly 3% following reports of discussions with Terafab, Elon Musk's planned chip venture in Texas.

The story was first reported by Culpium, a newsletter written by journalist Tim Culpan, and Elon Musk has acknowledged the discussions but has not announced an agreement.

However, on Friday, Wall Street's advance narrowed as the 10-year Treasury yield rebounded to 5.28% from an intraday dip below 5.17%. On Thursday, yields reached near 5.35%, pushing longer-term rates close to levels last seen two decades ago.

Investing.com attributed part of the sell-off to increased corporate borrowing for artificial intelligence initiatives.

Brent crude was trading around $101 per barrel after briefly exceeding $103, amid a Saudi-supported campaign against Yemen's Iran-aligned Houthi forces.

Nevertheless, a single weak employment report has not eliminated the risks. Investing.com pointed to long-term yields, concerns in European bond markets, and geopolitical risks as potential triggers for renewed volatility.

This leaves the current rally vulnerable to a bond market that is still processing elevated corporate borrowing related to AI.