Asian stocks rose Wednesday while bonds steadied after a bruising selloff, as investors awaited a key US inflation reading for clues on the Federal Reserve’s next moves.
The MSCI Asia Pacific Index gained 0.9%, with 10 of its 11 industry groups advancing.
Equity-index futures pointed to further gains in Europe and on Wall Street.
Japan’s Nikkei 225 rose 1.4%, while the broader Topix gained 0.6%.
South Korea’s Kospi and Kosdaq both advanced more than 1%, while Australia’s S&P/ASX 200 was marginally higher.
The moves came after a sharp rise in longer-dated Treasury yields raised concerns about the persistence of inflation and the possibility of further Fed rate increases.
Treasury yields stabilize after selloff
US Treasury yields steadied across the curve after climbing sharply earlier in the week.
The 30-year Treasury yield reached 5.6206% in Tuesday’s session, its highest level since June 2002.
The benchmark 10-year yield climbed to 5.293%, its highest since June 2007.
The 10 year yield retreated to 5.24% while the 30-year yield slipped to 5.52.
The rise in yields has increased borrowing costs across the economy.
The average 30-year fixed mortgage rate reached 7.58% Tuesday, its highest level since November 2023.
Markets have been reassessing the outlook for interest rates after the Fed signaled that borrowing costs could rise further.
The central bank currently targets a federal funds rate of 3.75% to 4%, while its projections point to a rate of about 4.1% by year-end.
However, expectations for an October hike eased after comments from New York Fed President John Williams.
The probability of at least a 25-basis-point increase at the Fed’s October meeting fell to 51.5%, according to CME FedWatch.
Williams said the central bank has time to assess incoming data before deciding when to raise rates again.
That makes the upcoming US inflation report particularly important for markets, with investors looking for evidence on whether elevated energy prices are feeding into broader inflation pressures.
Oil remains central to rate outlook
Oil prices continued to complicate the inflation outlook.
Brent crude rose 0.8% to around $103.40 a barrel, recovering some of Tuesday’s losses.
Despite ongoing risks to shipping and geopolitical tensions, separate estimates from JPMorgan Chase and Goldman Sachs indicated that crude flows from the Middle East are moving back toward pre-war levels.
Oil and US-Iran tensions remain important sources of uncertainty for investors. Markets are looking for clearer signs of progress in negotiations after conflicting signals in recent days.
The recent rise in energy prices has contributed to the increase in global bond yields, as traders assess the possibility that higher oil costs could keep inflation elevated and make additional rate hikes more likely.
China data points to continued expansion
Chinese equities also extended their gains after recent economic data pointed to continued recovery.
The Shanghai Composite rose 0.3% to 3,843.1, while the Shenzhen Component gained 0.3% to 12,940.5.
Official data showed China’s composite PMI rose to 50.7 in September, its highest level since December 2025.
Manufacturing PMI increased to 50.1 from 49.8, while non-manufacturing PMI rose to 50.2 from 49.0, with both sectors returning to expansion.
A separate private survey showed the composite PMI at 52.1. Manufacturing activity increased to 52.1 from 51.5, while services rose to 51.6 from 51.4.
The data provided further support for Chinese equities after their gains in the previous session.
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