Asian shares track Wall Street higher, Treasury yields near multi-decade highs

Asian shares followed Wall Street higher on October 6 after a tech-fueled rally lifted the Nasdaq to a record close. The retreat in oil prices provided additional support, despite longer-dated Treasury yields hovering near multi-decade highs. The euro lingered near 17-month lows after briefly touching US$1.116 overnight, weighed down by growing fiscal concerns in France.

Investors sold French government bonds following an underwhelming budget and heightened political uncertainty after Spanish Prime Minister Pedro Sanchez announced a snap election. Brent crude remained steady at US$100 a barrel, after losing 1.9% the previous day as Middle East exports surged and the G7 nations committed to increasing supply.

MSCI's Asia-Pacific index outside Japan increased by 0.2%, while Japan's Nikkei rose 0.7%. European stock futures climbed 0.5%, while Nasdaq and S&P 500 futures gained 0.2% and 0.1%, respectively. The Nasdaq achieved a record high overnight, spurred by softer-than-expected jobs data that dampened expectations for a Federal Reserve rate hike in October.

Nvidia, an AI leader, surged 2.1%, hitting a record-high close and reaching a market value of $5.76 trillion. Analyst Kyle Rodda of Capital.com attributed the market rally to tech stocks, noting that easing interest rate uncertainty and reduced geopolitical risk allowed investors to focus on the exceptional earnings growth delivered by AI companies.

Third-quarter earnings season began the following week, with Goldman Sachs projecting S&P 500 earnings to grow by 27% in the quarter, with over half of that growth resulting from AI infrastructure spending companies. Latin American markets also gained, driven by a rally in Brazilian stocks and the real currency, following right-wing Senator Flavio Bolsonaro's strong performance in the first round of the presidential election, advancing to a run-off against incumbent Luiz Inacio Lula da Silva.

Treasury yields kept increasing even as the market reduced expectations for an October Federal Reserve rate hike to 23% from 71% a week earlier, after top policymakers emphasized the need for more data before further tightening. US 10- and 30-year Treasury yields reached new 24-year highs overnight, marking a steady rise since mid-August due to inflation and debt concerns.

The 10-year Treasury yield stayed at 5.3089% in Asia, up 3 basis points overnight to 5.3493%, the highest since 2002, while 30-year yields remained at 5.6622%, briefly reaching 5.7029% the previous day. The euro fell to US$1.1215, its lowest since May 2025, after dropping as much as 0.8% to US$1.116 overnight, its weakest level since November 2025.

The euro hovered around 177 yen, having declined for seven consecutive days, around the lowest since November 2025. "France's parliament divisions create risk that fiscal consolidation may be diluted or the government could face a no-confidence vote," said Joseph Capurso, head of international economics at Commonwealth Bank of Australia.

"EUR/USD could test support at 1.1109," pushing the US dollar higher, with the US dollar index at 102.2 after a weekly gain of 0.9%. Gold prices were stable at US$4,141.31 an ounce.