Nikkei climbs 1.2% as weak US jobs data cools Fed bets

Japan's Nikkei 225 rose 1.2% in early trade, led by electronics and metals stocks, after weak US jobs data cooled Fed rate-hike bets.

"Bad news is good news in this case," said Allan Small, senior investment adviser at iA Private Wealth, after the July payrolls report showed US nonfarm payrolls fell by 23,000 against the 80,000 additions economists polled by Reuters expected.

The advance extended a global relief rally after traders cut the odds of a 25-basis-point Fed hike in September to 44 percent from 67 percent a week earlier, according to CME FedWatch. Gold climbed 2.3 percent and silver gained 3.3 percent as the dollar eased, while the yen traded at 158.51 per dollar and the US 10-year Treasury yield held near 4.65 percent.

The move suggests investors are betting the Fed will hold rates steady at its September meeting, a scenario that would support risk appetite across Asian equities after a volatile stretch driven by concerns over the durability of the AI-driven rally. The central bank's decision now hinges on incoming inflation data, with the next consumer price report due before the policy meeting.

Electronics and metals names led the Nikkei's advance, with chip-related stocks rebounding after a week of selling tied to worries that AI-linked valuations had run too far. The sector had driven the index to a record earlier this year before giving back gains in a sharp pullback. The rebound in Japanese tech names tracked a firmer close on Wall Street, where the Nasdaq Composite rose 1.3 percent and the S&P 500 gained 0.6 percent, led by the same semiconductor names that had dragged markets lower through the week.

The yen's stability near 158 per dollar also supported exporter shares, which benefit from a weaker domestic currency. A stronger yen had weighed on Japanese equities in recent sessions as traders positioned for possible intervention after last week's coordinated currency action by Japan and the US, which had triggered a sharp rally in the currency before it faded.

Broader Asian markets were mixed in the prior session, with South Korea's Kospi slipping 0.5 percent and China's CSI 300 edging up 0.2 percent, as investors weighed the Fed outlook against lingering Middle East supply risks that have kept oil prices elevated. Brent crude traded near $82 a barrel, down from a peak of $102 two weeks ago after Houthi attacks on Saudi Arabia renewed supply concerns and raised the risk of renewed inflation pressure.

For Japanese equities, the key question is whether the Fed's pause translates into sustained inflows. The Nikkei's 1.2% gain marks a tentative recovery, but strategists caution that a stronger-than-expected inflation print could revive hike bets and reverse the move. The next test comes with the US consumer price report, due before the Fed's September decision, which will determine whether the relief rally has legs or proves short-lived.

This article is for informational purposes only and does not constitute investment advice.