Asian Markets Slip Ahead of Expected US Rate Cut

Asian stocks faltered on Monday as investors braced for an expected US interest rate cut this week, with uncertainty lingering over how aggressively the Federal Reserve will ease policy in the months ahead.

The anticipated cut has been widely priced in after recent comments from key Fed officials and data showing continued weakness in the US labour market. However, lingering inflation pressures and softening consumer confidence have raised doubts about how much room the central bank has to continue lowering rates.

The latest, delayed reading of September’s personal consumption expenditure (PCE) index — the Fed’s preferred inflation gauge — showed a slight rise from August, with core inflation holding steady. While the data did little to alter market expectations, it highlighted that inflation remains above the Fed’s target.

Economists noted that the Fed’s communications blackout ends Thursday, and policymakers’ remarks afterward will be closely watched for signs of dissent. With data releases delayed by the recent government shutdown, several major indicators are due before the Fed’s next meeting in January, including three non-farm payroll reports, unemployment data, two inflation releases and multiple months of retail sales figures.

Analysts expect the Fed to adjust its policy statement to reflect cooling labour conditions and possibly signal that further cuts will require stronger justification — a move likely to appease more hawkish members. Markets are anticipating what some analysts call a “hawkish cut,” with limited easing projected for early 2026.

Despite Wall Street ending last week higher, Asian markets struggled to maintain momentum. Tokyo was flat, while Hong Kong, Sydney and Singapore slipped. Shanghai, Seoul, Wellington and Taipei posted gains.

Geopolitical tensions also weighed on sentiment as China-Japan relations soured further. Tokyo summoned Beijing’s ambassador after Chinese military aircraft allegedly locked radar onto Japanese jets near Okinawa. China rejected the claim, calling Japan’s statement inconsistent with the facts and urging an end to “smearing.”

Key figures around 0230 GMT:

    Tokyo – Nikkei 225: Flat at 50,473.84

    Hong Kong – Hang Seng: Down 0.6% at 25,919.77

    Shanghai Composite: Up 0.6% at 3,925.12

    Dollar/yen: Down to 154.96 from 155.32

    Euro/dollar: Up to $1.1653 from $1.1642

    Pound/dollar: Up to $1.3333 from $1.3329

    Euro/pound: Up to 87.38 pence from 87.35

    WTI crude: Flat at $60.07

    Brent crude: Flat at $63.74

    New York – Dow: Up 0.2% at 47,954.99

    London – FTSE 100: Down 0.5% at 9,667.01