Asian Stocks Look Subdued as Investors Await Fed: Markets Wrap
Asian stocks are poised for a sluggish start following a tepid Wall Street session, as investors hold back ahead of Wednesday’s Federal Reserve rate decision.
Equity futures signaled losses in Sydney and Tokyo, though Hong Kong looked set to open higher, after the slipped 0.1% and the Nasdaq 100 ended a nine-day winning streak. Gold briefly topped $3,700 an ounce, buoyed by a softer US dollar that fell to its weakest level in more than 10 weeks.
The focus has shifted firmly to the Fed meeting, as traders wait for clues on the path of rates that will shape the outlook for markets over the next few months. A solid reading on US retail sales on Tuesday did little to move trading.
“The American consumer appears to be in good spirits,” said Ellen Zentner at Morgan Stanley Wealth Management. “That’s good news for the economy, but it may heighten debate over how aggressively the Fed needs to cut rates.”
While Fed officials are still focused on bringing inflation to their target, they’re widely expected to cut rates in an effort to shield the labor market from further deterioration.
The value of retail purchases , not adjusted for inflation, increased 0.6% after a similar gain in July. The — which feed into the calculation of goods spending for gross domestic product — climbed 0.7%, indicating a healthy quarter.
“Even if the job market is weak, it’s not hurting the consumer yet,” said at TradeStation. “While these numbers won’t prevent the Fed from cutting rates tomorrow, they reduce some of the longer-term dovish hopes.”
Treasuries held gains after a solid sale of 20-year bonds . The yield on two-year notes slid three basis points to 3.51%. The euro hit its highest since 2021, while the yen touched its strongest mark in a month. Oil rose as pressure mounted on Russia and the conflict in the Middle East flared up.
While the retail-sales report was another piece of good economic news, much of the recent has been driven by expectations of six rate cuts over the next 12 months, according to Florian Ielpo at Lombard Odier Investment Managers.
“These six cuts can only come if the job-market deterioration is material and the equity performance that came with it is dependent over it,” he said.
US PREVIEW: FOMC to Cut Rates Amid Open and Silent Dissents
With the Fed’s post-meeting statement set to be released on Wednesday, investors will look for changes in the latest quarterly rates projections, known as the , and pore over Jerome Powell ’s remarks a half-hour later.
Recent speculation about the need for a 50-basis point rate cut is not justified by the current data, according to Seema Shah at Principal Asset Management. Broader economic indicators — including earnings and credit spreads — do not reflect the kind of deterioration typically warranting that level of action, she said.
“We join the chorus of voices anticipating a 25 basis-point Fed cut,” said Lauren Goodwin at New York Life Investments. “That said: though we expect the market reaction to the Fed meeting to have a ‘sell the news’ flavor, we’d fade that pessimism in the near term.”
Bonds Hint Growth, Not Inflation, Is Now Stocks’ Chief Concern
Money markets are fully pricing in a quarter-point Fed reduction, and a series of interest-rate cuts over the next year. An outlook echoing that view would be an , who have largely banked on a gradual easing path that keeps the economy from sliding into a recession.
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This story was produced with the assistance of Bloomberg Automation.
