Asian equities fell Thursday after US stocks and government bonds dropped as robust economic data blurred the picture for imminent Federal Reserve rate cuts.

Shares in Australia and Japan opened lower, and a gauge of US-listed Chinese companies slipped in New York trading on Wednesday. US futures declined, weighed down by post-market losses for Microsoft Corp. shares, which fell around 4% in late trading after disappointing second-quarter forecasts. The S&P 500 lost 0.3% and the Nasdaq 100 dropped 0.8% Wednesday.

Treasuries were steady in Asian trading, while Australian and New Zealand yields rose. A measure of the global bond market fell to the lowest level in almost three months on Wednesday. Traders trimmed bets on policy easing after data showed that the US economy expanded at a robust pace in the third quarter, helped along by accelerating household purchases and defense spending. A measure of underlying inflation rose 2.2%, roughly in line with the Federal Reserve’s target.

“Solid but not blistering growth fits nicely within the current economic backdrop,” even if that means a slower path of rate cuts, said Bret Kenwell at eToro. “It’s far better to have a strong economy and earnings driving stocks higher rather than hopes of easing monetary policy from the Fed,” he said.

Elsewhere in Asia, the yen was little changed at around 153 per dollar ahead of the Bank of Japan’s interest rate decision, where it is expected to stand pat at 0.25%. Taiwan will suspend trading on its stock exchange Thursday as a powerful typhoon barrels toward the archipelago.

An index of dollar strength fell slightly Wednesday. A measure of one-week implied volatility on the Bloomberg Dollar Spot Index rose on Wednesday to the highest since December 2022, when recession fears briefly raced through financial markets. That indicates traders are preparing for large swings in the currency against major peers like the euro, yen, Chinese yuan and Mexican peso, pushing up the cost of options that protect against such moves.Oil edged higher on Thursday, extending its gains from the previous session. Gold was steady at around $2,787 per ounce early Thursday after touching a fresh record in the prior session. Demand for the precious metal was partly supported by the uncertainty posed by next week’s US presidential election.

US Election

The US stock market’s fundamental flows are turning increasingly bullish, which should give equities a fresh jolt once the US election is out of the way.

The elements of a rally are building up — stocks are entering a historically strong season and companies are starting to buy back shares. Investors may be over-hedged for the series of earnings, US election and central bank risks looming through early November. And with market volatility declining from the early-August high, systematic investors and options desks may be forced to snap up stocks.

“Animal spirits” could return to markets in the wake of the US election, Barclays Plc strategists led by Emmanuel Cau wrote in a note, saying as investors appear to be in “wait-and-see” mode into the vote.

Equity inflows were steady in October with caution remaining under the hood and volumes low. The strategists say that hedge funds and systematic strategies added to their equity positions in October, after largely being on the sidelines in September.

While US stocks may be rising ahead of a potential victory for Donald Trump in next week’s US election, strategists at Citigroup Inc. say a clean sweep for the Republican party will be a signal to sell.

A Trump win is generally seen as good news for stocks because his proposals to lower corporate taxes would likely benefit company earnings. The Citi strategists argue, however, that the “near-euphoric sentiment” that’s driving the S&P 500 toward a sixth straight month of gains is leaving it ripe for a pullback.