Weak U.S. economic data has heightened expectations for Federal Reserve interest rate cuts, propelling Asian equities to fresh record highs. The U.S. dollar weakened against all G10 currencies as investors adjusted positions ahead of a key employment report.

The MSCI Asia Pacific Index rose 1% on Tuesday, reaching a new all-time high and extending its outperformance over U.S. and European equity markets for the year. U.S. Treasury futures extended their rally, with the 10-year yield falling to its lowest level in about a month. Gold, which typically benefits from lower interest rates, advanced 0.4%, with the spot price holding firmly above $5,000.

Unexpected stagnation in U.S. December retail sales data indicated weaker consumer support for the economy at year-end, reinforcing expectations that the Fed may cut rates later this year. Swap markets have increased pricing for a third rate cut this year, with two cuts almost fully priced in before the September meeting. The U.S. Dollar Spot Index fell 0.2%, marking its fourth consecutive day of decline.

Market focus has now shifted to Wednesday's employment report and inflation data later in the week for further signals on the policy outlook. Economists forecast the addition of 65,000 jobs in January, which would be the best performance in four months, while the unemployment rate is expected to hold steady at 4.4%. The jobs data will also include annual revisions, expected to show downward revisions to employment figures for the year ending March 2025.

S&P 500 futures advanced 0.3%. South Korea's KOSPI index extended its intraday gain to 1%. Australia's S&P/ASX 200 index closed up 1.7% at 9,014.80 points. Indonesia's benchmark stock index rose 1% intraday to 8,211.28. The U.S. dollar fell below 153 yen, with its intraday decline widening to 1%, last trading at 152.85. The euro rose 0.1% to $1.1908. Australia's 10-year government bond yield fell 7 basis points to 4.76%. Bitcoin declined 1.6% to $67,531.27. Brent crude oil rose 0.8% to $69.36 per barrel, while West Texas Intermediate crude gained 0.9% to $64.52. Spot gold increased 0.4% to $5,044.53 per ounce.

Employment Data in Focus "The jobs report will be key," said Bret Kenwell of eToro. "Weak data could further shift market sentiment towards safety amid heightened growth concerns, while solid data might alleviate some worries." "Following recent mixed economic data, market attention on tonight's U.S. jobs report is likely higher," said Lorraine Tan, Director of Equity Research at Morningstar Asia. "If the data is soft, it should raise expectations for Fed rate cuts." Money market data shows traders have slightly increased the probability of three rate cuts this year, a rise from a week ago, with Tuesday's weaker-than-expected retail sales data adding momentum for a dovish pivot. U.S. Commerce Department figures showed December retail sales unexpectedly stalled, indicating reduced consumer support for the economy at year-end.

Asia Leads Global Gains Asian markets are experiencing another strong year, outperforming their U.S. and European counterparts. Most regional equity benchmarks have gained in 2026, currencies have shown resilience against external pressures, and credit demand has pushed spreads near historic lows. Although it is still early in the year and Asia has not been immune to global volatility, several forces are working in the region's favor. Artificial intelligence is one theme, with global investors navigating billions in spending and the disruption it brings. On Tuesday, the S&P 500 fell 0.3% due to weakness in several technology stocks, though the index remains near the record high set last month. Futures for the S&P 500 and Nasdaq 100 continued to rise, suggesting momentum may carry over to Wall Street.

Broad Dollar Weakness The U.S. dollar fell against all major currency pairs as investors increased bets on Fed rate cuts following fresh signs of U.S. economic weakness. "The relative interest rate story is back in play," said David Forrester, a strategist at Credit Agricole in Singapore. "Weak U.S. economic data is encouraging investors to price in a higher probability of further Fed easing." The Australian dollar led gains against the greenback after Reserve Bank of Australia Deputy Governor Andrew Hauser stated inflation remains "too high," paving the way for potential further rate hikes. The yen strengthened for a third consecutive day following Prime Minister Takaichi Sanae's election victory over the weekend. Hedge funds prepared for the U.S. jobs data by purchasing dollar-yen option structures that would appreciate if the pair continues to fall. They also bought Australian dollars against the U.S. dollar in the spot market. Calvin Yeoh, a hedge fund manager at Blue Edge Advisors holding long yen positions, stated, "Tonight's non-farm payrolls and the CPI data are important to see if this interest rate divergence persists."

Gold Holds Above $5,000 Gold posted modest gains, consolidating above the $5,000 level after weak U.S. retail sales data supported the case for Fed rate cuts. Spot gold rose 0.6% to $5,059.53 per ounce. Falling yields have helped boost gold prices, according to Manav Modi, an analyst at Motilal Oswal Financial Services in Mumbai. Gold pays no interest and typically rises when yields elsewhere become less attractive. The U.S. 10-year Treasury yield fell to its lowest level in nearly a month. Gold surged to a record high above $5,595 per ounce in late January, driven by geopolitical turmoil, attacks on Fed independence, and a shift of funds away from traditional assets like currencies and sovereign bonds. However, speculative buying led to an overheated rally, causing gold to plunge roughly 13% over two sessions. It has since recovered about half of those losses and has been trading around $5,000 this week. Many banks believe the rally will resume, as the underlying reasons for its rise remain intact. BNP Paribas expects gold to reach $6,000 by year-end, with Deutsche Bank and Goldman Sachs Group also issuing bullish forecasts. Silver rose 2% to $82.4272 per ounce, while platinum and palladium both gained more than 1.5%.

Other Market Moves Oil prices rose as Middle East tensions surrounding Iran outweighed the impact of a U.S. industry report showing a substantial inventory build. Brent crude advanced 0.8% to $69.36 per barrel, while West Texas Intermediate crude increased 0.9% to $64.52. Reports indicated the U.S. is considering seizing tankers carrying Iranian crude, with additional reports suggesting another carrier strike group could be sent to the region if talks on Iran's nuclear program fail. Regarding Bitcoin, demand recovery remains limited despite so-called "whales" buying after the price plunge, raising doubts about a genuine rebound. According to crypto analytics firm Glassnode, wallets holding over 1,000 Bitcoin accumulated approximately 53,000 BTC in a week, the most since last November. Bitcoin traded at $67,443 on Wednesday morning, down 1.7% from the previous evening. "This has slowed the downtrend, but the market needs more inflows," said Brett Singer, Head of Sales at Glassnode.