Asian Stocks Rise In Run Up To Fed Rate Decision

Most stocks in Asia advanced on Wednesday taking cues from Wall Street as the US Federal Reserve geared up to announce the crucial decision.

The Japanese stocks led the advance as the Bank of Japan is also set to decide on its key interest rate on Friday. S&P ASX 200 was down 0.06% at 8,236, while Nikkei was up 0.71% at 36,462 as of 9:00 a.m. Stock market in Hong Kong will be closed for a public holiday.

The US Central Bank is widely expected to cut interest rates on Wednesday for the first time since March 2020 to engineer a soft landing. While the debate on the size of the rate cut rages on, traders are increasingly pricing in a half-point cut.

Fed funds futures traders on Tuesday priced in a 63% probability of a 50 basis-point cut, up from 47% last Friday. They saw a 37% probability of a 25 basis-point cut, according to the CME FedWatch Tool. 

Just ahead of the Fed meeting, US retail sales unexpectedly rose in August, pointing to healthy consumer demand that continues to underpin the economy.

Meanwhile, Bank Indonesia and Brazil’s central bank will also decide on their key interest rate on Wednesday. The US policy decision later in the day will be followed by a press conference by the Chair Jerome Powell.

A Fed rate cut of 25 basis points might instill fear in the markets, according to Andrew Holland, chief executive officer of Avendus Capital Public Markets Alternate Strategies. He hopes for a rate cut of 50 basis points.

“For the Fed, it’s really about whether it’s 25 or 50 (basis points cut), and the narrative around what it’s saying about ongoing rate reductions. I hope it goes around 50 bps, and given the kind of interest rate cycle we are in, I think that’s what the markets would like as well," he told NDTV Profit.

The yen weakened more than 1% against the dollar on Tuesday, ahead of its central bank meeting, according to Bloomberg data.

Bitcoin soared up to 6.4% to $61,337, the sharpest rally in over a month on Tuesday, as speculations grew over the anticipated rate cut by the US Federal Reserve.

US stocks pared gains after briefly crossing record highs as traders remain captivated about the size of the cut after retail sales rose. The S&P 500 and Nasdaq Composite rose 0.03% and 0.20%, respectively. The Dow Jones Industrial Average declined by 0.04%.

Brent crude was trading 0.43% lower at $73.38 a barrel as of 9:02 a.m. IST. West Texas Intermediate was down 0.44% at 70.88.

• US Dollar Index at 100.8850.

• US 10-year bond yield at 3.64%.

• Brent crude down 0.43% at $73.38 per barrel.

• Bitcoin was down 0.16% at $60,043.43.

• Gold spot was up 0.12% at $2,572.59.