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Monday’s trading in Asia is kicking off on a high, with investors buzzing after a blowout U.S. jobs report that caught even the most bullish forecasters off guard. The labour market showed all the right moves—surging job gains, a dip in the unemployment rate, and solid wage growth—hitting that elusive “Goldilocks” balance: not too hot, not too cold, just perfect for the markets.The takeaway? The much-debated 50-basis-point Fed rate cut for next month is officially off the table. Instead, traders are locking in bets for two smaller quarter-point cuts over the next few meetings. That shift sent the U.S. dollar flying higher, long-term Treasury yields spiking, and any lingering recession fears fading fast as U.S. economic resilience took center stage.But here’s the kicker: the Fed’s cutting rates into economic strength—flipping the script on the usual playbook, where cuts happen when the economy’s in trouble. It’s no wonder stocks took off into the weekend, with tech stocks leading the charge.With well-behaved inflation and U.S. economic surprises continuing to turn more positive, equities love the ride.The real test arrives later this week with September’s CPI report. The near-term market pricing for the next Fed meeting is riding on that data. If the CPI print lands even slightly hotter than expected, we could see the November Fed decision turn into a toss-up between holding steady or delivering a 25-basis point cut. And we all know how quickly markets react when the chance of those preemptive rate-cut “treats” starts slipping away—stocks could sharply retreat as traders rush to adjust their positions.Meanwhile, the commodity market has been on fire. In just three weeks, prices for everything—metals, oil, grains—have skyrocketed more than 10%, fueled by supply chain kinks, the short-lived East Coast port strikes, and Middle East tensions. The big question is: is this just a geopolitical blip, or is global demand quietly ramping up with China back in the game.? If commodity prices keep climbing, inflation worries could start creeping back, making this week’s inflation data even more crucial.Investors in Asia should be ready to ride that momentum wave. Nikkei futures signal a strong open in Japan, fueled by a weaker yen, but the broader market is keeping a cautious eye on rising U.S. yields and climbing oil prices. Higher U.S. rates and a firmer dollar could tighten global financial conditions, potentially cooling the excitement after the initial catch-up trade.Friday’s rally was a loud and clear vote of confidence in U.S. exceptionalism. The dollar surged over 2%—its best week in more than two years. Brent crude soared 9%, marking its strongest week since January. And the Dow hit record highs, sending a clear message: the bulls are in control. But with inflation data looming and geopolitical risks still simmering, this week promises to be anything but predictable. Buckle up.Vacationers are returning from Golden Week today. On the mainland, the festive spirit seems to have driven higher occupancy rates at small to medium-sized hotels, fueled by a last-minute booking surge. Optimism is still buzzing, with early signs suggesting the consumer spending bounce everyone was banking on may have hit its mark. Local sentiment has been boosted by government support and a wave of e-vouchers. Now economists are crunching the numbers, with investors eagerly awaiting confirmation of a solid economic lift.As markets prepare for tomorrow’s official session, mainland investors are hoping to catch a ride on the U.S. reflation wave, with fingers crossed that Golden Week delivered a shot of confidence to China’s service sector. But let’s be real—the long-term trajectory hinges on whether Beijing rolls out the big guns with a massive fiscal stimulus package. The fate of China’s mega-rally may very well depend on the government’s decision to launch a CNY 5-10 trillion special fiscal bond issuance. While it’s not on the table this week, the market is laser-focused on the signals and optics. The bottom line? The Party is considering a “whatever it takes” fiscal approach, and if you’re riding the China rally, you’ll be hoping that fiscal bazooka drops sooner rather than later.More By This Author:The Reflation Trade Arrives
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