With a government shutdown averted, investor attention will be turning back to the Federal Reserve and the outlook for rates

Hong Kong (AFP) - Asian markets were mixed Monday after the US Congress passed a last-minute deal at the weekend to avoid a costly government shutdown.

With that distraction out of the way, temporarily at least, investor attention is now likely to turn back to the outlook for US rates, with Federal Reserve boss Jerome Powell due to give a speech later Monday and key jobs data out later in the week.

US stocks ended Friday mostly lower as a government shutdown appeared likely after hardline Republicans had tanked an earlier plan to keep the lights on, with the Dow and S&P 500 down 0.5 percent and 0.3 percent, respectively, while the Nasdaq managed a small gain.

In Asian trade Monday, Tokyo led the gainers, jumping 1.4 percent after the Bank of Japan’s Tankan survey showed increasing optimism among the country’s largest manufacturers as business confidence improved for a second-straight quarter in September.

Taipei, Jakarta, Bangkok and Singapore also advanced while Hong Kong, South Korea and India were closed for holidays. Markets in mainland China were closed for a week-long holiday.

Sydney, Wellington, Kuala Lumpur and Manila were in the red.

“Financial markets were bracing for a shutdown, so there’s an element of relief, but it’s only a temporary lifting of one of the clouds hanging over the markets now,” Yung-Yu Ma, chief investment officer at BMO Wealth Management, told Bloomberg.

“Interest rates and Fed hawkishness remain the name of the game and the main driver of the markets over the next few weeks.”

With a US government shutdown averted, eyes will be back on Fed Chair Powell – who joins Philadelphia Fed President Patrick Harker on Monday for a round-table discussion with workers and small-business owners – for any hints on rates and with key jobs data later in the week.

“With one of the potholes in Q4 economic growth seemingly filled temporarily, investors initially responded with a sense of relief during Monday’s Asian market opening,” said SPI Asset Management’s Stephen Innes.

“However, there’s a question looming about whether the market will interpret this good news for the economy as bad news for stocks.”

With focus shifting back to the “hawkish” Fed, “Friday’s jobs report could provide valuable insights into the future direction of US yields and stocks, assuming that interest rates remain a key focus for investors, as the report will significantly influence the Fed’s response,” said Innes.

On Friday, New York Fed President John Williams said rates could be held at their current peak levels for some time.

On forex markets, the yen was weakening towards the pyschological 150 to the dollar level.

The yen’s weakness is fuelling speculation that the government may step in to prop up the currency, which has been hammered by the Bank of Japan’s refusal to move away from its ultra-loose monetary policy even as the Federal Reserve considers lifting interest rates further.

- Key figures at 0330 GMT -

Tokyo - Nikkei 225: UP 1.4 percent at 32,305.66 (break)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Brent North Sea crude: UP 0.3 percent at $92.45 per barrel

West Texas Intermediate: UP 0.3 percent at $91.08 per barrel

Euro/dollar: DOWN at $1.0569 from $1.0576 Friday

Pound/dollar: DOWN at $1.2190 from $1.2205

Euro/pound: UP at 86.70 pence from 86.64 pence

Dollar/yen: UP at 149.78 yen from 149.40 yen

New York - Dow: DOWN 0.5 percent at 33,507.50 points (close)

London - FTSE 100: UP 0.1 percent at 7,608.08 points (close)