Asian Stocks Hit Record High as Strong U.S. Jobs Data Tempers Fed Rate Cut Hopes

Asian stocks surged to fresh record highs on Thursday, supported by a rally in technology shares and renewed investor confidence across the region. South Korean and Japanese equities led gains in early trading, pushing MSCI’s broadest index of Asia-Pacific shares up 0.65%. The benchmark index has climbed roughly 13% in the first six weeks of the year, reflecting strong momentum in global equity markets.

Japanese stocks have rallied sharply following Prime Minister Sanae Takaichi’s decisive election victory, which was driven by promises of increased economic stimulus. Investors are betting that a stable political mandate could strengthen Japan’s fiscal outlook, contributing to a nearly 3% surge in the yen since the weekend. The Japanese currency last traded at 153.02 per U.S. dollar, outperforming other major currencies despite broader dollar strength.

Meanwhile, stronger-than-expected U.S. jobs data has reshaped expectations for Federal Reserve interest rate cuts. January job growth accelerated unexpectedly, while the unemployment rate edged lower, signaling continued labor market resilience. As a result, market expectations for a March Fed rate cut have dropped sharply from around 20% to just 5%, according to CME’s FedWatch Tool. However, traders still anticipate at least two rate cuts later this year.

Rising Treasury yields supported the U.S. dollar, with the two-year yield climbing to 3.512% and the 10-year yield reaching 4.186%. Analysts caution that sustained dollar strength will require continued positive economic surprises, especially with U.S. inflation data due Friday.

In commodities markets, oil prices extended gains amid escalating U.S.-Iran tensions. Brent crude rose 0.4% to $69.68 per barrel, while U.S. West Texas Intermediate crude increased 0.46% to $64.93. Spot gold slipped 0.44% to $5,058.49 after posting strong gains in the previous session.