Asian stocks stall as investors await key US inflation data

Asian markets were mixed on Tuesday, failing to follow Wall Street’s latest record highs as investors turned their focus to upcoming US inflation figures that could shape Federal Reserve policy.

The cautious mood followed a rally in recent weeks, driven by expectations of further monetary easing in the United States. The Fed cut interest rates last week and signaled two more reductions by year-end to support a slowing labor market despite lingering inflationary pressures.

Attention is now on Friday’s release of the personal consumption expenditures index, the Fed’s preferred inflation gauge.

Trading in the region was muted, with Japan closed for a holiday and Hong Kong bracing for a storm. Hong Kong, Shanghai, Manila and Wellington edged lower, while Sydney, Seoul, Singapore and Jakarta posted gains.

Taipei outperformed, climbing more than 1% as chipmaker TSMC jumped nearly 3%, tracking US peer Nvidia’s surge after the company pledged a $100 billion investment in OpenAI to develop next-generation artificial intelligence.

Still, analysts warned the recent rally may be overextended, with risks from Washington adding to uncertainty. The US faces a possible government shutdown after the Senate rejected a stopgap funding bill on Friday. With both chambers of Congress due to recess next week, lawmakers have little time left to avert a shutdown before the September 30 fiscal deadline.

A shutdown would halt many non-essential government operations and leave hundreds of thousands of federal workers temporarily unpaid.

“There are rickety bridges ahead,” said Stephen Innes of SPI Asset Management. “The shutdown drama is unresolved, and markets are vulnerable. Complacency can quickly turn to chaos when risks materialize.”