Stocks upbeat, dollar wobbles as Fed hike bets recede

On Monday, stocks opened strongly while the dollar dipped and bonds remained stable, as investors reduced expectations of an aggressive Federal Reserve tightening cycle following weak US jobs data. The impact of the muted data was felt globally, with Asian markets taking cues from Wall Street's performance. September's job growth slowed more than anticipated, and the revised nonfarm payrolls for the previous two months showed a significant decline, diminishing the likelihood of additional Fed rate hikes this month.

Jose Torres, a senior economist at Interactive Brokers, stated that the risk of further job losses means the Fed cannot hike rates further, which contradicts the prevailing market pricing. The probability of a Fed rate increase this month fell to just 22% from 64% a week ago. This shift in expectations boosted Japan's Nikkei, Australian stocks, and several Asia-Pacific indices.

Bond yields, initially impacted by the data, rebounded on Friday, maintaining levels near multi-year highs due to deteriorating government finances and high energy costs. The US dollar faced pressure from the reduced Fed hike expectations, but the dollar's strength was constrained by global demand for US securities and favorable economic performance. Commodity markets remained resilient, with oil prices holding steady and gold prices climbing.