Asian Stocks Rise As Traders Expect Jumbo Fed Rate Cut
Markets in China and South Korea will remain shut for public holidays.
Most Asian stocks rose on Tuesday ahead of the crucial rate decision by the US Federal Reserve, with traders increasingly pricing in a half-point cut.
The equity benchmark in Japan fell, while those of Australia and Hong Kong were trading higher. S&P ASX 200 was up 0.23% at 8,140, while Hang Seng was up 0.91% at 17,580 as of 7:48 a.m. Markets in China and South Korea will remain shut for public holidays.
The US central bank will begin its two-day meeting starting Tuesday while traders and economists remain captivated by how much the Fed will pivot.
Fed funds futures traders on Tuesday priced in a 62% probability of a 50 basis-point cut, up from 47% last Friday. They saw a 38% probability of a 25 basis-point cut, according to the CME FedWatch Tool.
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 US retail sales data for August that is set to be released on Tuesday can also weigh in on the central bank's crucial decision.
Bond traders haven’t been this divided about the outcome of an upcoming decision since before the great financial crisis of 2008, according to Bloomberg.
While the S&P 500 edged only mildly higher, the Dow Jones Industrial Average closed at a fresh record. Wall Street's technology stocks were mixed with Apple Inc., Nvidia Corp. and Tesla Inc. weighing on the tech-heavy Nasdaq index.
The S&P 500 and Dow Jones Industrial Average rose 0.13% and 0.55%, respectively. The Nasdaq Composite declined by 0.52%.
Crude oil extended its gains as Libyan exports continued to slump. Brent crude was trading 0.40% higher at $73.04 a barrel as of 5:57 a.m. IST. West Texas Intermediate was up 0.68% at 70.57.
Key Levels
US Dollar Index at 100.68.
US 10-year bond yield at 3.62%.
Brent crude up 0.40% at $73.04 per barrel.
Bitcoin was up 0.71% at $58,080.68.
Gold spot was flat at $2,582.44.
