Asian Futures Show Cautious Optimism Ahead of Fed: Markets Wrap
Asian stocks are poised for a mainly positive open as Wall Street hit fresh highs ahead of an expected Federal Reserve rate cut this week.
Equity futures signaled gains for Hong Kong and Sydney, boosted by bets showing a Fed cut is already priced in for Wednesday. Tokyo may slip as markets reopen from Monday’s holiday. S&P 500 contracts were steady, as a record-breaking run in US equities heads for an inflection point, with the expected rate cut set to dominate a week that will shape policy for half of the world’s 10 most-traded currencies.
Bets on Fed easing sent the above 6,600 on Monday, while the saw its longest advance since 2023. A jump in erased its 2025 drop after Elon Musk ’s $1 billion stock purchase. Also aiding sentiment was a framework deal on keeping TikTok running in the US, with Trump saying he’d talk to China’s Xi Jinping Friday.
Treasuries rose, with two-year yields hovering near the lowest since last September. The slid. Gold rose to a .
Signs of labor-market weakening and no major inflation surprises have sealed the deal for what money markets project will be a quarter-point Fed cut in September. The big question, though, will be the pace of easing after that, with prices stubbornly above the central bank’s 2% target.
“Now the discussion will turn to how aggressively the Fed will act,” said Chris Larkin at E*Trade from Morgan Stanley. “The Fed may remind everyone that it may be focused on jobs now, but it hasn’t forgotten about the other half of its mandate.”
Read: Trump Urges Powell to Cut Rates ‘Bigger Than He Had in Mind’
US policymakers on Wednesday will also release their quarterly update of economic and rate forecasts — known as the — and Fed Chair Jerome Powell will hold his regular post-decision press conference. In June, Fed officials were narrowly in favor of two quarter-point cuts in 2025.
What traders will really hang on to is the tone of Powell’s press conference and the “dot plot” projections, according to Fawad Razaqzada at City Index and Forex.com.
“I’ll be watching how the market reacts to any mention of inflation being ‘well anchored’ or the labor market ‘cooling more than expected,” he said. “That sort of language would be music to the ears of dollar bears. On the flip side, a cautious Fed that hints at a ‘wait and see’ approach might stall the rally, at least temporarily.”
Before that, Razaqzada noted that there’s also a bit of data to keep things lively before and after the decision. Tuesday’s retail sales could either reinforce the soft-landing narrative or raise fresh concerns about consumer demand, he said.
Meanwhile, trade tensions between the two biggest economies could ratchet up after China ruled that Nvidia Corp. violated anti-monopoly laws with a high-profile 2020 deal. The emerged with officials from the nations heading into a second day of wide-ranging negotiations in Madrid over tariffs.
A team of US officials was due to on Monday night for trade deal discussions, signaling the two nations are moving closer to resolving differences.
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