Asian markets experienced a mixed performance on Monday as investors prepare for an anticipated interest rate cut by the Federal Reserve later this week. The US central bank is expected to lower borrowing costs, potentially by 25 basis points, although some analysts predict a 50-basis-point reduction. This decision follows recent data indicating a softening labor market and relatively stable prices, despite the impact of US President Donald Trump’s tariff war.
The Federal Reserve’s policy meeting on Wednesday will be closely watched, with market observers expecting a 25-basis-point cut. However, President Trump has suggested that a more significant reduction might be possible, stating, “I think you have a big cut. It’s perfect for cutting.” Chris Weston of Pepperstone notes that while a 50-basis-point cut is possible, the market would be surprised if the Fed does not opt for a 25-basis-point reduction.
In addition to the Federal Reserve’s meeting, the central banks of Canada, Britain, and Japan are also scheduled to meet this week. This series of meetings has contributed to the fluctuating performance of Asian markets, with some indices rising and others falling. The Nasdaq reached a new peak on Friday, while Hong Kong, Singapore, and Jakarta saw gains in early trade. Seoul hit a record high after the government scrapped plans to lower the capital gains tax threshold for stock investors.
However, Shanghai edged down due to weaker-than-expected data on China’s economy, including slower growth in retail sales and industrial production. Sydney and Wellington also experienced losses, with ANZ bank retreating after agreeing to pay a record fine of Aus$240 million over “widespread misconduct.” Tokyo’s market was closed for a holiday.
The talks between China and the US in Madrid, scheduled to cover trade and other issues, will also be closely monitored. Chinese Vice Premier He Lifeng and his team will discuss their dispute over TikTok with the US delegation, led by Treasury Secretary Scott Bessent. These negotiations come after China launched investigations into the US semiconductor sector.
Key figures at around 0230 GMT included the Hang Seng Index, which rose 0.2% to 26,447.34, and the Shanghai Composite, which fell 0.1% to 3,867.95. The euro/dollar exchange rate was down at $1.1728, while the pound/dollar rate was up at $1.3561. Oil prices also saw a slight increase, with West Texas Intermediate rising 0.5% to $63.01 per barrel and Brent North Sea Crude up 0.4% to $67.28 per barrel.
The Federal Reserve’s decision on interest rates will have significant implications for global markets, and investors will be watching closely for any signs of a shift in monetary policy. The upcoming talks between China and the US will also be crucial in determining the trajectory of trade relations between the two nations. As the week unfolds, market volatility is likely to continue, with investors seeking clarity on these key issues.