Asian stocks slip as investors brace for Fed decision and AI earnings test

Asian stocks and U.S. equity futures retreated on Wednesday as investors awaited a pivotal Federal Reserve decision and prepared for earnings that could challenge lofty valuations in the artificial intelligence sector.

While most markets stayed subdued ahead of the Fed announcement, sharp movements elsewhere drew attention. The Japanese yen tumbled suddenly, and silver prices continued their rapid climb to fresh record highs.

Futures traders remain confident that the Fed will cut interest rates by 25 basis points to a range of 3.50–3.75 percent, assigning the move an 89% probability. However, expectations for further easing are low, with markets pricing only a 21% chance of another cut in January. Analysts say the tone of the Fed’s guidance and the distribution of “dot plot” forecasts will be critical, especially if one or two of the 12 voting members dissent.

Goldman Sachs economist David Mericle said Chair Jerome Powell will likely stress that the threshold for future cuts has increased, while also acknowledging why some policymakers opposed an immediate easing. Still, he noted the Fed cannot commit too strongly to staying on hold given the lack of updated employment data and upcoming inflation readings.

The November jobs report was postponed to December 16 due to the recent government shutdown, with inflation figures scheduled to follow shortly after. Some analysts at Bank of America believe the Fed may also announce plans in January to begin purchasing Treasury bills to prevent a potential liquidity crunch.

Asian equity markets were largely cautious. Japan’s Nikkei opened higher before slipping 0.5%, and South Korea’s market fell 0.4%. MSCI’s Asia-Pacific ex-Japan index dipped 0.1%, while Chinese blue chips lost 0.8% after mixed inflation data showed a slight rise in consumer prices but persistent deflation in producer prices.

European futures showed little momentum. EUROSTOXX 50 contracts were steady, while FTSE futures declined 0.3% and DAX futures fell 0.2%. U.S. futures also edged lower, with S&P 500 futures down 0.1% and Nasdaq futures off 0.2% ahead of earnings from Oracle and Broadcom. Analysts warned that any disappointment in their capital expenditure or cloud infrastructure spending could send ripples across the broader AI sector.

Bond markets remained tense. The 10-year U.S. Treasury yield held at 4.187% after rising sharply from a recent low. A break below key support at 4.201% could send yields toward 4.535%, amplifying the importance of the Fed’s message.

Currency markets saw the dollar firm, supported by higher yields and heavy yen selling. The euro jumped to a record high of 182.64 yen, while the British pound climbed to its strongest level since mid-2008 at 208.95 yen. The dollar traded at 156.75 yen after gaining 0.5% the previous day.

In commodities, silver was the standout performer, soaring past $60 to reach a historic $61.02 per ounce. Prices have more than doubled this year amid shrinking inventories and strong demand from trend-following funds. The Silver Institute noted rising industrial demand from sectors such as solar power, electric vehicles, data centers, and artificial intelligence.

Gold was comparatively stable at $4,212 per ounce, below its October peak.

Oil prices inched higher after earlier declines triggered by Iraq’s restoration of production at Lukoil’s West Qurna 2, one of the world’s largest oilfields. Brent crude rose 0.2% to $62.07 a barrel, while U.S. crude gained 0.2% to $58.39.