Ahead of US Nonfarm Payrolls, global stock markets rebound: KOSPI closes up 1.64%, Japanese yen strengthens, and oil prices edge higher

The dovish statements from Federal Reserve officials have led the market to reprice rate hike expectations, resulting in global stock markets rising for the third consecutive day, with Asia-Pacific assets broadly strengthening.

Federal Reserve Governor Waller stated that if inflation continues to recede, he will support keeping interest rates unchanged. This statement significantly reduced market bets on a rate hike in September. The swaps market now prices the probability of a 25 basis point hike in September at around 50%, down sharply from about 70% earlier this week. The US dollar stabilized after hitting a four-month low, while US Treasuries and gold maintained their gains.

Asia-Pacific markets benefited across the board. The MSCI Asia Pacific stock index rose by 0.8%, driving gains in the world’s broadest global stock benchmark—the MSCI All Country World Index—for a third straight day. South Korea’s KOSPI closed up 1.64% at 6,687.21 points. The Korean won against the US dollar touched its highest level since July 1, 2025. Japan’s ultra-long government bond yields also saw significant declines, with both 20-year and 30-year tenors falling by about 10 basis points.

Aidan Yao, Senior Investment Strategist at AXA Investment Managers, stated in an interview with Bloomberg TV that with just about two weeks until the Federal Reserve meeting and roughly two months before the US midterm elections, the market faces considerable uncertainties. "My personal judgment is that downside risks may be slightly greater than the upside, so I think maintaining a somewhat cautious stance is warranted."

• The Nikkei 225 Index closed up 1.3% at 65,020.94 points. Japan’s TOPIX closed up 0.03% at 4,103.23 points. South Korea’s KOSPI closed up 1.64% at 6,687.21 points.

• The US dollar traded around 156.28 against the yen, with the previous session’s intraday high at 155.30.
• The Korean won against the US dollar touched its highest level since July 1, 2025.
• The yield on the US 10-year Treasury note was little changed at 4.76%.
• Japan’s ultra-long government bond yields also fell significantly, with the 20-year and 30-year tenors each falling about 10 basis points. The 10-year yield dropped 6.5 basis points to 2.900%.
• Brent crude edged higher to about $95.65 per barrel, on track for its biggest weekly gain since July. West Texas Intermediate crude rose 0.4% to $91.68 per barrel.
• Spot gold fell below $4,460/oz, down 0.3% intraday.
• Bitcoin declined 0.5% to $81,079.42.

Earlier this week, rising oil prices combined with a hawkish stance from Federal Reserve Chair Waller pushed global yields to multi-decade highs, resulting in sharp losses in the bond market. Waller’s remarks quickly reversed this dynamic, providing simultaneous support for both stock and bond markets.

Waller indicated that if inflation continues moving toward the Fed’s 2% target, he is willing to support "maintaining the current policy rate." The Fed’s preferred inflation gauge—the Personal Consumption Expenditures Price Index—registered 3.7% in July, down from 4.1% in May, but still significantly above the target level.

Market attention is now turning to Friday’s nonfarm payroll data. Suresh Tantia, Chief Investment Officer for Asia Equities Strategy at UBS Global Wealth Management, said in an interview with Bloomberg TV that Waller’s comments are "very significant because they could shift or reset the balance for the Fed’s next policy decision." He emphasized that nonfarm payrolls and the next inflation data will be key in determining whether the Fed takes action at its next meeting.

Yen movement is another focus in Asian markets. The yen appreciated by about 2% on Thursday alone, recovering its gradual losses of the previous month. As of reporting, the US dollar was trading around 156.28 yen, with the previous session’s strongest point at 155.30.

Market participants further increased their bets on a Bank of Japan rate hike, while closely watching the risk of further intervention by Japanese authorities to bolster the yen. According to Nomura Securities’ Yujiro Goto, it is reasonable for the Bank of Japan to raise rates by 25 basis points in September, with further tightening potentially to follow.

Yields on Japan’s ultra-long government bonds fell in tandem, with the 20-year yield dropping 10 basis points to 3.715% and the 30-year yield falling 10 basis points to 3.975%, reflecting a reevaluation of global central bank monetary policy trajectories by the market.

In other markets, Brent crude edged higher to about $95.65 per barrel, set for the largest weekly gain since July. Renewed tension between the US and Iran has heightened market concerns over continued disruptions to energy flows through the Strait of Hormuz, lending support to oil prices.

Nasdaq 100 futures rose 0.2%, and European markets pointed to a modestly higher open. Bitcoin hovered near $81,000, while the two-year US Treasury yield, which is sensitive to interest rates, stabilized at 4.34% after declining in the previous session.

Aidan Yao, Senior Investment Strategist at AXA Investment Managers, stated in an interview with Bloomberg TV that with about two weeks until the Fed meeting and nearly two months before the US midterm elections, markets face significant uncertainty. "My personal judgment is that downside risks may be slightly larger than the upside, so I think it is prudent to maintain a somewhat cautious attitude."

Furthermore, the bond market sell-off earlier this week also reflects deeper structural pressures: years of large-scale government spending, persistent price pressures, and a borrowing wave by companies to finance artificial intelligence initiatives have all led investors to demand higher returns for holding debt.