Asian stocks slip as investors hesitate despite rising expectations of Fed rate cut

Asian stocks struggled to hold early gains on Thursday, even as fresh US economic data strengthened expectations that the Federal Reserve will deliver a third consecutive interest rate cut next week.

Wall Street recorded a second straight day of gains following Monday’s brief dip, but sentiment across Asia remained cautious amid ongoing concerns about stretched valuations in the technology sector.

Market bets on a Fed rate cut have climbed to around 90 percent over the past two weeks, boosted by comments from several central bank officials who signalled that supporting the weakening labour market now outweighs concerns about lingering inflation.

That view was reinforced by new figures from payrolls processor ADP, which reported that the US economy lost 32,000 jobs in November. Analysts had expected an increase of 10,000. ADP’s chief economist Nela Richardson said the results reflect employers grappling with “cautious consumers and an uncertain macroeconomic environment.” The data marks another sign of a cooling labour market.

Elias Haddad of Brown Brothers Harriman said the latest indicators strengthen the case for more rate cuts, noting that labour demand is weakening and consumer spending shows “early signs of cracking.”

However, Asian markets fell short of matching the strong gains seen in New York. Tokyo ended higher alongside Sydney and Manila, but Hong Kong, Shanghai, Seoul, Singapore, Wellington, and Taipei all closed in the red.

Despite the uneven performance, Pepperstone analyst Michael Brown noted that broader momentum still points upward, helped by optimism and fear of missing out as the year-end rally continues.

Still, Bank of America economists warned that the Federal Reserve remains a key source of potential volatility. While inflation has moderated and the outlook for policy easing remains intact, uncertainty over the exact timing of cuts could unsettle markets.

Key figures at around 0230 GMT

Tokyo – Nikkei 225: UP 1.5 percent at 50,596.24
Hong Kong – Hang Seng Index: DOWN 0.3 percent at 25,687.40
Shanghai – Composite: DOWN 0.4 percent at 3,846.39
Euro/dollar: DOWN at $1.1660
Pound/dollar: DOWN at $1.3336
Dollar/yen: UP at 155.37 yen
Euro/pound: UP at 87.43 pence
WTI crude: UP 0.2 percent at $59.09
Brent crude: UP 0.2 percent at $62.77
New York – Dow: UP 0.9 percent at 47,882.90
London – FTSE 100: DOWN 0.1 percent at 9,692.07