Asia Markets Face Headwinds as Taiwan Exchange Bounces Before Potential Reversal

The Taiwan Stock Exchange staged a remarkable recovery on Thursday, reversing a two-day selloff that had wiped out over 870 points and nearly 3.3 percent from the index. However, Friday’s outlook suggests the gains may not hold as regional markets brace for softer trading.

Market Snapshot: Thursday’s Rally in Context

After hitting lows of 27,183.03, the TSE surged 846.24 points to close at 27,426.36, representing a 3.18 percent jump. The index traded as high as 27,493.63 during the session, signaling strong intraday momentum. Yet with the index hovering just above the 27,420-level, market participants remain cautious about the sustainability of this bounce.

The recovery was led by technology and financial sectors, with semiconductor heavyweights driving much of the upside. Taiwan Semiconductor Manufacturing Company accelerated 4.30 percent, while Hon Hai Precision spiked 3.28 percent. Largan Precision rallied 3.37 percent and MediaTek vaulted 2.16 percent, demonstrating strong appetite for chipmakers in the current environment.

Financial stocks also contributed meaningfully to the advance. Mega Financial jumped 1.80 percent, First Financial collected 1.62 percent, and Fubon Financial strengthened 1.36 percent. In the materials space, Nan Ya Plastics skyrocketed 5.20 percent and Formosa Plastics soared 3.12 percent, while Delta Electronics surged 6.71 percent.

Global Backdrop: U.S. Weakness Sets Tone for Asia

The optimism in Taiwan comes despite a decidedly negative session on Wall Street, which typically sets the tone for Asian trading. U.S. indices closed significantly lower on Thursday as investors reassessed economic data and monetary policy prospects.

The Dow dropped 386.51 points or 0.84 percent to 45,752.26. The NASDAQ plummeted 486.18 points or 2.15 percent to 22,078.05, while the S&P 500 fell 103.40 points or 1.56 percent to 6,538.76. An early rally triggered by better-than-expected earnings from Nvidia proved short-lived as broader market concerns took hold.

Interest Rate Uncertainty Clouds the Outlook

The U.S. employment report for September delivered mixed signals that unsettled investors. While unemployment ticked up unexpectedly, job creation substantially exceeded economist forecasts. This conflicting data has complicated expectations for Federal Reserve policy going forward.

Market odds for a December rate cut have declined dramatically. According to CME Group’s FedWatch Tool, the probability of a quarter-point reduction has fallen to 39.8 percent from 30.1 percent just one day prior—a sharp retreat from the 98.8 percent probability recorded a month ago. This shifting calculus around U.S. monetary policy is weighing on risk appetite across Asia.

Energy Markets and Friday’s Prospects

Crude oil prices edged lower as geopolitical developments unfolded. West Texas Intermediate crude for December delivery declined $0.27 or 0.44 percent to settle at $59.18 per barrel, reflecting cautious sentiment ahead of potential Russia-Ukraine war negotiations.

As the Taiwan Stock Exchange prepares for Friday’s open, investors should brace for potential weakness given the negative lead from U.S. bourses and the uncertain interest rate backdrop facing regional economies. The bounce witnessed Thursday may prove to be a temporary reprieve rather than the start of a sustained recovery.