In a mixed session for Asian markets, Japanese stocks saw gains on Wednesday, while most other markets in the region fell as investors treaded cautiously ahead of the upcoming US presidential election and a pivotal Federal Reserve rate decision next week.

Japan’s Topix Index, a key stock market gauge, rose approximately 1% on Wednesday, largely due to strength in the technology sector, which was bolstered by a record-setting close for the Nasdaq Composite in the United States. This sectoral uptick in Japan reflects optimism fueled by the overnight performance of tech stocks on Wall Street, where robust earnings from major firms have invigorated investor sentiment.

The Topix’s gain stands in contrast to declines across most other Asian markets, as caution prevails globally. Investors are wary of potential volatility, awaiting clarity on US policy direction and interest rate adjustments following next week’s Federal Reserve decision.

In contrast to Japan’s upward movement, stocks in mainland China, Hong Kong, and Australia declined on Wednesday, signaling mixed regional performance amid a turbulent macroeconomic environment.

• Mainland China: The Shanghai Composite Index remained largely unchanged, with traders holding positions steady as they await developments from China’s National People’s Congress meeting scheduled from November 4 to 8. This meeting could introduce fresh fiscal measures to stimulate China’s slowing economy and address local government debt concerns.
• Hong Kong: The Hang Seng Index dipped 0.4%, continuing a streak of declines influenced by economic uncertainties and global market hesitations.
• Australia: The S&P/ASX 200 Index fell by 0.5%, with persistent inflation concerns in Australia reinforcing the Reserve Bank’s perspective that inflation pressures may persist longer than anticipated.

The currency and bond markets reflected cautious trading as well, with investors responding to signs of economic strength in the US and the potential ramifications of the Fed’s upcoming decision on global markets.

• US Dollar:  A gauge of the dollar’s strength against a basket of major currencies, saw a pause after a three-day advance, reflecting the hesitation in currency markets.
• Japanese Yen: The yen appreciated slightly, rising 0.1% to 153.20 per dollar, as traders seek safe-haven assets amid global uncertainty.
• US Treasuries: Yields on 10-year US Treasuries declined slightly by one basis point to 4.24%, as demand for bonds remained steady amid concerns over inflationary pressures and heavy debt issuance. Treasury yields are, however, poised to end October with their largest monthly loss in over two years, underscoring the challenging investment climate for bonds.

As a traditional hedge against market instability, gold extended its upward trend, hitting a fresh record early on Wednesday. Spot gold rose 0.3% to $2,781.87 per ounce, indicating robust demand for safe-haven assets.

In the cryptocurrency market, Bitcoin hovered near its all-time high, trading at $72,354.07, while Ether rose marginally to $2,623.74. Bitcoin’s elevated position has been attributed by analysts to its reputation as a “Trump trade,” reflecting market speculation around the former president’s potential return to office.

New US economic data showed that job openings in the country fell to their lowest level since early 2021. This dip in job availability contrasts with September’s employment report, which indicated a still-strong labor market, though recent data has led traders to scale back expectations for further aggressive rate hikes by the Fed.

In the corporate sphere, Alphabet Inc., Google’s parent company, saw a strong performance in late US trading, rising over 5% following better-than-expected earnings. Conversely, Advanced Micro Devices Inc. (AMD) fell 7% after issuing a subdued revenue forecast, dampening sentiment within the semiconductor sector.

As of Wednesday, futures for the S&P 500 climbed 0.4% in Asian trading hours, following a modest 0.2% increase for the index in the previous session. Nasdaq 100 futures also rose by 0.4%.

Asian investors are also closely monitoring the Bank of Japan’s (BOJ) rate decision scheduled for Thursday. With inflation pressures and domestic economic considerations in play, the BOJ’s response is anticipated to set the tone for Japan’s monetary policy. Any BOJ decision that hints at maintaining ultra-low rates could provide further support for Japanese equities but might lead to further yen weakness against the dollar.

China’s upcoming economic decisions, to be discussed in the National People’s Congress meeting from November 4 to 8, also hold significant implications for the region. Reports suggest that Chinese policymakers are considering an additional 10 trillion yuan ($1.4 trillion) in borrowing to address pressing local government debt and stimulate the economy amid weak domestic demand. A fiscal stimulus of this scale could have far-reaching effects, both within China and across the Asian market landscape.

Several key economic indicators will be released this week, shaping global investor expectations.

• Eurozone: Consumer confidence and GDP figures are due on Wednesday, while CPI and unemployment data will be released Thursday.
• United States: US GDP, ADP employment, and pending home sales are scheduled for release on Wednesday. The quarterly Treasury refunding announcement, detailing bond-auction plans, will be closely watched. Further data on personal income, spending, and PCE inflation are anticipated on Thursday.
• China: Manufacturing and non-manufacturing PMI readings are set for Thursday, with additional manufacturing data from Caixin due on Friday.

As of the close in Asia, here’s how major indexes, currencies, and commodities moved:

Stocks

• S&P 500 futures: Rose 0.4%
• Nikkei 225 futures (OSE): Increased by 0.9%
• Japan’s Topix: Gained 1%
• Australia’s S&P/ASX 200: Declined 0.5%
• Hong Kong’s Hang Seng: Fell 0.4%
• Shanghai Composite: Remained largely unchanged
• Euro Stoxx 50 futures: Held steady

Currencies

• Euro: Flat at $1.0822
• Japanese Yen: Rose 0.1% to 153.20 per dollar
• Offshore Yuan: Stable at 7.1426 per dollar
• Australian Dollar: Hovered at $0.6566
• Cryptocurrencies
• Bitcoin: Little changed at $72,354.07
• Ether: Increased slightly by 0.1% to $2,623.74

Bonds

• 10-year US Treasuries: Yield fell by one basis point to 4.24%
• Australia’s 10-year yield: Rose by one basis point to 4.46%

Commodities

• West Texas Intermediate (WTI) Crude: Increased 0.4% to $67.51 a barrel
• Spot Gold: Gained 0.3% to $2,781.87 per ounce

“We anticipate range-bound trading with limited surprises until the results of the US elections and the Fed’s interest-rate decision are announced,” said Kimmy Tong, a global market and foreign exchange strategist at Everbright Securities International. Investors are looking to the Fed’s decision to shed light on the future direction of US interest rates and are closely watching US economic indicators to gauge underlying trends.

For Asia, the focus remains on the BOJ’s decision and potential stimulus announcements from China’s leadership. Both factors could inject volatility into the region’s markets, especially given the ongoing economic headwinds and global risk factors.