Shares were mixed in Asia on Tuesday as global markets prepared for the Federal Reserve’s highly anticipated meeting. Tokyo’s Nikkei index fell 1% to 36,203.22, while the Hang Seng index in Hong Kong advanced 1.3% to 17,654.79. Markets in mainland China and South Korea were closed, and Australia’s S&P/ASX 200 gained 0.2% to 8,140.90.
Traders are keenly awaiting the Fed’s decision on interest rates scheduled for Wednesday. It is anticipated that the Fed will cut its key rate for the first time in over four years, following a period of high rates aimed at controlling inflation. The central question is how much economic relief the Fed will provide. Mizuho Bank cautioned that markets steeped in rich policy expectations might face volatility, suggesting that traders should brace for potential policy surprises that could lead to market re-pricing.
In U.S. markets on Monday, the Dow Jones Industrial Average rose 228 points, or 0.6%, closing at 41,622.08, surpassing its previous all-time high. The S&P 500 index increased by 0.1% to 5,633.09, nearing its record set in July. However, the Nasdaq composite slipped 0.5% to 17,592.13, as big technology stocks experienced slight declines. Notable movers included Oracle, which saw a 5.1% gain, and Alcoa, which jumped 6.1% following a stake sale announcement. In contrast, major tech stocks like Apple and Nvidia experienced declines, impacting overall market performance.
Traders are now leaning toward a larger-than-usual rate cut of half a percentage point by the Fed, according to CME Group data. While a larger cut could ease economic pressures, it might also stimulate inflation. Inflation has significantly eased from its peak two summers ago, and the Fed is now focusing on supporting the slowing job market and economy. Some critics argue that the Fed’s actions might be coming too late, potentially increasing the risk of a recession. In currency markets, the dollar fell slightly against the Japanese yen and the euro, while U.S. and Brent crude oil prices saw modest increases.
