Japanese stocks led gains for Asian markets on Thursday as an auction of government bonds drew strong demand from investors, while the U.S. dollar recovered from a five-week low. The Nikkei 225 (.N225), opens new tab rose 2.2%, led by a near-12% gain for industrial robot manufacturer Fanuc Corp (6954.T), opens new tab, while MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab was trading flat, weighed down by declines in Korea and New Zealand.
In early European trade, pan-region futures were up 0.6%, German DAX futures were up 0.6%, and FTSE futures were up 0.31%. Tokyo's latest debt sale drew the strongest demand in more than six years, helping to steady investor nerves after a selloff that has pushed yields on super-long-dated bonds to record highs and spilled over into global fixed income markets earlier this week. Bond yields rise when prices fall. "The 30-year JGB auction was unexpectedly strong," said Shoki Omori, chief desk strategist for rates and FX at Mizuho in Tokyo. "The extent of prior selling appears to have imparted a sense of valuation cheapness, thereby encouraging demand."
But follow-through for longer maturities "remains fragile, and sentiment will require multiple solid auctions to improve," he added. The yield on the 30-year Japanese government bond was last down 4.0 basis points at 3.38%. The dollar was last up 0.1% at 155.32 against the yen, with the Japanese currency recovering some ground after Reuters reported the Bank of Japan is likely to raise interest rates in December with the government expected to tolerate such a decision, citing three government sources familiar with the deliberations.
S&P 500 e-mini futures were little changed as momentum from U.S. markets overnight petered out in Asia, after weaker-than-expected economic data cemented expectations the Federal Reserve will cut interest rates at its meeting next week.
Stocks on Wall Street advanced on Wednesday led by small-cap companies, as the Russell 2000 index jumped 1.9% and the benchmark S&P 500 (.SPX), opens new tab rose for a second day. The gains came after U.S. private payrolls data posted their biggest drop in more than two-and-a-half years.
Wall Street's main indexes closed higher on Wednesday, with the Dow adding almost nine-tenths of a percent,
Meanwhile, a separate survey from the Institute for Supply Management showed its measure of services sector employment contracted in November, with the subindex of prices paid falling to a seven-month low. "That move aligns with our view that the recent uptick in supercore inflation is likely to subside, paving the way for a resumption of disinflation in 2026," said ANZ economist Henry Russell on a podcast.
"We remain of the view that it is appropriate for the Fed to continue to cut interest rates to respond to downside labour market risks," he said, adding the bank expects a 25-basis-point cut at next week's meeting and further easing next year.
Fed funds futures are pricing an implied 89% probability of a 25-basis-point cut at the U.S. central bank's next meeting on December 10, compared to a 83.4% chance a week ago, according to the CME Group's FedWatch tool.
