Cooling in the US labor market has reduced pressure on the Federal Reserve to raise rates, sending Asia-Pacific stocks broadly higher on Monday, with Japanese technology shares leading gains, while oil prices spiked in early trading before retreating.

US September nonfarm payrolls came in below expectations and wage growth slowed, prompting money markets to immediately lower the implied probability of a Fed rate hike in October to below 25%. The data significantly shifted market judgments on the rate path, offering breathing room for risk assets.

The Nikkei 225 index intraday reclaimed the 70,000 level, rising more than 2.5% during the session. The MSCI Asia-Pacific index gained 1% to 279.06 points. The Philippine stock index opened 0.8% higher. The Taiwan stock index rose 2% to 49,465.19 points.

FTSE China A50 index futures edged up 0.22% in early trading, after closing 0.14% higher in the prior night session. The Hang Seng Tech index opened lower, at one point falling more than 0.8%, before reversing into gains. Artificial intelligence and optical communication sectors led the advance.

The positive reaction in Asia-Pacific equities echoed the strong momentum in US technology stocks. Nasdaq 100 index futures rose 0.4%, after the benchmark index set a record high last Friday. Meanwhile, the bond market strengthened slightly, with the US Treasury yield curve edging lower across the board.

Asia-Pacific Stocks Broadly Higher, Japan Leads Tech Rally

The MSCI Asia-Pacific index rose 0.5%, while Japan's Nikkei 225 gained about 2%, with technology stocks particularly standout. Markets in South Korea and mainland China were closed for holidays and did not participate in the rally.

The softening employment data directly lowered market expectations for further Fed tightening, providing clear support for high-valuation technology sectors. Nasdaq 100 futures moved higher, further reinforcing investor sentiment toward Asia-Pacific technology stocks.

Shane Oliver, Chief Economist and Head of Investment Strategy at AMP Ltd., wrote in a research note:

The September employment data was 'not too hot, not too cold,' consistent with a 'Goldilocks' scenario, further reinforcing market expectations that the Fed will not rush to hike again this month.

It was mentioned that in the first round of Brazil's election, right-wing Senator Flavio Bolsonaro 'unexpectedly led' Lula, sending the race to a second round. In the first round, Bolsonaro led incumbent President Lula 47.8% to 44.2%, far exceeding polling expectations. The two will face off in a runoff on October 25.

Affected by this, Brazil exchange-traded funds listed in Japan surged 7.6%, and Brazilian real futures contracts strengthened in tandem.

Hang Seng Tech Stages V-Shaped Rebound, AI and Optical Communication Strengthen

The Hong Kong market's trajectory was relatively uneven, with AI and optical communication-related stocks strengthening.

The Hang Seng Index opened lower and fluctuated in a narrow range, while the Hang Seng Tech index at one point fell more than 0.8% before turning higher.

Technology stocks including NetEase, Meituan, Xiaomi Group, and JD.com fell more than 1% in early trading. FTSE China A50 index futures edged up 0.22%.

Among AI stocks, Deepwise Intelligence at one point rose more than 12%, and Zhipu gained more than 2%.

In the optical communication sector, Comba Telecom surged nearly 13%, Cambridge Technology rose 5%, Hygon Information continued to strengthen with gains exceeding 6%, and Junzhi Group rose 4%.

Technology stock sentiment was generally warm. According to a Bloomberg report, Kevin Gordon, Head of Macro Research and Strategy at Charles Schwab, said AI-related technology stocks are supporting the broader market's overall performance, even though many individual names have already experienced significant pullbacks.

US Treasury Yields Edge Lower, Oil Prices Spike Then Retreat

During Monday's Asia-Pacific session, the US Treasury yield curve strengthened slightly overall, with the benchmark 10-year yield falling 2 basis points to 5.25%, consistent with signals from the employment data pointing to rising rate-cut expectations.

Although rate hike expectations have receded somewhat, medium-term pressure on the bond market has not fully dissipated. This week, the US Treasury will hold auctions for 10-year and 30-year notes, giving the market an opportunity to test investors' actual demand for longer-dated bonds. The Fed will also release minutes of its September meeting on Wednesday, with attention focused on policymakers' comments on inflation trends and the outlook.

Mark Dowding, Chief Investment Officer for Fixed Income at RBC BlueBay, noted in a research report:

Over the past week, global bond yield curves have steepened overall, and the dramatic volatility in fixed income markets has finally drawn broad attention from financial markets. Nevertheless, concerns about consecutive central bank rate hikes have eased somewhat in recent days.

Brent crude fell 0.9% to around $101.34 per barrel, after having risen above $103 earlier.

It was mentioned that the Middle East situation is drawing significant attention this week. Saudi Arabia is planning a large-scale military operation against the Houthi armed group in the coming days, targeting coastal areas that have allowed the Houthis to control the Bab el-Mandeb Strait, a key maritime channel.

Reports said the operation will be led by Yemeni government ground forces, supported by Saudi air power, focusing on striking Houthi strategic footholds along the coast. However, the brief boost from geopolitical events did not last, and oil prices subsequently gave back gains.

Gold rebounded slightly by 0.46% to $4,158 per ounce, after just ending its largest weekly decline since June.

London Metal Exchange copper futures at one point rose 0.9%, before gains narrowing to 0.22%, with copper prices last Friday posting their largest weekly drop since March. LME tin rose 0.2%, while aluminum was flat.

Because US tariff threats have led traders to dump hundreds of thousands of tons of metal into the United States, potentially squeezing supply in other regions. At the same time, consumption demand from data centers and renewable energy has boosted prices. Analysts believe China remains on its Golden Week holiday, which has somewhat dampened liquidity in the metals market.