Asian stocks trade in the red ahead of Fed interest rate decision
- Asian equities are losing altitude, possibly on hawkish Fed expectations.
- The Fed is expected to cut rates by 25 basis points and signal a pause in the easing cycle.
Asian stocks are facing moderate selling pressure, possibly on expectations for a hawkish rate cut by the Federal Reserve (Fed).
As of writing, Japan's Nikkei is shedding 0.4%. Indices in Australia, South Korea, and Hong Kong are also flashing red.
Meanwhile, the Shanghai Composite is trading largely unchanged on the day.
Jared Kushner, Trump’s son-in-law, and adviser, said on Tuesday that the United States and China have come to an understanding on the direction of their trade relationship after a nearly 16-month trade war, according to South China Morning Post.
The positive comments, however, are likely being overshadowed by hawkish Fed expectations.
The US central bank is expected to cut rates by 25 basis points (bps) on Wednesday, but signal a pause in the easing cycle. Also, the market has priced in the 25 basis point cut.
Analysts at ANZ believe:
A rate cut from the Fed looks a done deal this week as it takes out more insurance against elevated external risks.
Forward policy guidance may point to the FOMC taking some time out to observe the impact of recent cuts.
The risk is for more easing, at some point, given low inflation expectations, modestly above-trend growth and elevated downside risks.
Asian stocks may fly high on Thursday if the Fed surprises markets by signaling further rate cuts over the next few months.