Asian stocks rose and bond yields stabilized on Wednesday following gains on Wall Street and reports of strong corporate profits. MSCI's broadest index of Asia-Pacific shares outside Japan increased by 1.5%, while Japan's Nikkei 225 rose 1.3% and South Korean shares gained 4%. These movements followed a Tuesday session where the S&P 500 rose 0.3%, supported by data from LSEG showing that 86% of the 13% of companies that have reported earnings so far have exceeded analyst estimates.
The market activity occurs as investors monitor several geopolitical and economic developments. In the energy market, Brent crude futures rose 1.1% to $110.03 per barrel on Wednesday, extending gains after touching a five-month high on Tuesday. Traders are currently balancing reports of potential peace negotiations with Middle East tensions, including a meeting between the Iranian president and Pakistan’s army chief and continued Houthi attacks on Saudi Arabian infrastructure.
In diplomatic developments, U.S. envoy Steve Witkoff is scheduled to meet Russian President Vladimir Putin on Wednesday. This follows talks between Witkoff and Ukrainian President Volodymyr Zelenskiy in Norway, which a U.S. official described as \"constructive.\" President Donald Trump stated that it was time for the conflict in Ukraine to end. Meanwhile, French stocks fell as the government announced a deployment of troops to reinforce police ahead of planned protests this Saturday.
The Federal Reserve is widely expected to maintain interest rates at its October 28 meeting, with an 83% probability of a hold priced into futures markets. However, a majority of economists surveyed by Reuters expect the central bank to raise rates in December.
In Japan, the yen traded at 158.33 per dollar on Wednesday following data showing September exports rose 16.7%. While the Bank of Japan is expected to hold rates on October 30, economists forecast a 25-basis-point increase in December. In Indonesia, the central bank is taking measures to stabilize the rupiah after MSCI warned it might exclude Indonesian stocks from its major benchmarks.
French 10-year bond yields nudged the yield differential compared to German 10-year bunds to 153.1 basis points as the government prepares for domestic unrest. As central banks in the U.S. and Japan approach their late October and December meetings, the resulting decisions will dictate borrowing costs.