Asian stocks steady as markets await Fed rate cut decision

Asian markets hovered near four-year highs on Monday, with investors bracing for a pivotal week dominated by the U.S. Federal Reserve’s policy meeting. The Fed is widely expected to deliver its first interest rate cut since December, with traders betting on the start of a broader easing cycle.

The Bank of Canada is also anticipated to trim rates by 25 basis points this week, while the Bank of Japan and Bank of England are expected to keep policy steady. In Europe, futures pointed to a firmer open, with EUROSTOXX 50 futures up 0.3%. U.S. futures also edged higher, with S&P 500 and Nasdaq contracts each gaining 0.1%.

Markets are fully pricing in a quarter-point Fed cut, which would lower the funds rate to 4.0–4.25%. Futures imply only a slim chance of a larger 50 basis point move. Attention will also be on the Fed’s updated “dot plot” forecasts and remarks from Chair Jerome Powell about the pace and scope of future easing.

Goldman Sachs chief U.S. economist David Mericle said the key issue is whether the Fed signals a sequence of cuts. “We expect the statement to acknowledge labor market softening, but not to commit to further moves in October,” he noted.

Meanwhile, U.S. President Donald Trump escalated his attacks on Powell, accusing him of incompetence and harming the housing market.

Currency and regional moves

Trading in Asia was muted by a holiday in Japan. The euro was steady at $1.1732 despite Fitch’s downgrade of France, and the yen held within its recent range at 147.44 per dollar. ECB officials, including President Christine Lagarde, are due to speak this week after signaling policy is in a “good place.”

South Korea’s benchmark rose 0.4% to another record high after the government scrapped plans to raise taxes on stock investments. Chinese equities outperformed, with blue chips climbing 0.5% and Hong Kong’s Hang Seng up 0.2%, as investors bet on tech gains amid renewed Sino-U.S. trade talks.

U.S. and Chinese negotiators met in Madrid on Sunday to address tariffs and trade disputes and will continue discussions Monday. Trump said the White House was still considering options for TikTok, with a looming U.S. deadline for ByteDance to divest the app.

China data weakens

Fresh data showed China’s economy slowed further in August. Industrial output and retail sales both undershot expectations, property investment fell sharply, and housing prices slid 0.3% — extending a downturn that began in early 2023.

ING’s Greater China economist Lynn Song said the weak data strengthens the case for stimulus. “We see a high chance of another 10bp rate cut and a 50bp reserve ratio reduction in the coming weeks,” she said.

Commodities and bonds

Oil extended gains after Ukrainian drone strikes hit Russian refineries, raising concerns about crude exports. Brent rose 0.5% to $67.33 per barrel, while U.S. crude gained 0.5% to $63.00.

Gold was steady at $3,644 an ounce, holding close to last week’s record $3,673.95. U.S. Treasuries were closed for the Japan holiday, but 10-year yields last stood at 4.07%, near a five-month low after weak labor data fueled expectations for Fed easing.