Asian markets advance as US shutdown set to end

Asian markets advanced, with MSCI Asia-Pacific up 0.4% and Japan's Topix hitting a record high, as U.S. Congress moved to end the longest government shutdown, boosting sentiment. This comes as Fed funds futures now price a 67% probability of a 25-basis-point rate cut in December, influenced by recent ADP jobs data. While the Dow reached a record close, SoftBank Group saw a 6.2% decline after selling its Nvidia stake, highlighting a market grappling with potentially past peak momentum against strong underlying fundamentals like AI investment and anticipated rate cuts.

Analysis

Asian markets, including MSCI Asia-Pacific shares, advanced by 0.4%, with Japan's Topix hitting a new record high, driven by improved sentiment regarding the impending end of the U.S. government shutdown. S&P 500 e-mini futures also rose 0.2%, reflecting optimism as the House prepares to approve the Senate-passed bill to restore government funding. This resolution addresses the longest shutdown in U.S. history, providing a clear catalyst for market positivity despite a mixed U.S. session where the Dow closed at a record high but the Nasdaq slipped.

The probability of a 25-basis-point Federal Reserve rate cut on December 10 increased to 67% from 62% a day prior, according to CME Group's FedWatch tool, indicating heightened expectations for monetary easing. This sentiment is influenced by recent ADP weekly jobs data, which showed private employers shed an average of 11,250 jobs per week in the four weeks ending October 25. The U.S. dollar index saw a modest 0.1% gain, trading at 99.574, after earlier reaching its lowest levels this month.

SoftBank Group experienced a significant 6.2% decline, contributing to a 21% month-to-date loss, following its announcement of selling its entire stake in Nvidia. Despite this, SoftBank's shares have more than doubled this year, highlighting a complex market dynamic. Analysts suggest the market may be past "peak momentum" but acknowledge strong underlying fundamentals, including AI capital expenditure, anticipated U.S. rate cuts, and robust earnings, pointing to potential growth acceleration in 2026.

Key Decisions for Investors

• Monitor the final passage of the U.S. government funding bill for sustained market sentiment, as its resolution removes a significant near-term political overhang.
• Evaluate potential adjustments to fixed income and equity portfolios given the increasing probability of a December Fed rate cut, which could favor growth-oriented assets.
• Consider the implications of SoftBank's Nvidia stake sale on broader tech sector sentiment and its potential signal for institutional positioning.
• Closely watch upcoming economic data, particularly labor market indicators, for further cues on the Fed's monetary policy trajectory and its impact on currency markets.