Asian stocks slip as investors brace for Fed rate outlook

Most Asian stock markets declined on Tuesday as investors grew increasingly cautious ahead of the US Federal Reserve’s policy decision, widely expected to include an interest rate cut this week.

While traders are almost certain the Fed will trim rates on Wednesday, market focus has shifted to the central bank’s updated economic projections and the closely watched “dot plot,” which outlines policymakers’ expectations for future rate movements. Investors will also be paying close attention to the Fed’s statement and Chair Jerome Powell’s press briefing for hints about internal debates and the broader economic direction.

Recent data showing a cooling US labor market has boosted expectations for continued rate cuts, even as inflation remains higher than desired. Optimism was further lifted last month by reports that President Donald Trump’s top economic adviser, Kevin Hassett—an advocate for deeper rate cuts—was the leading candidate to replace Powell when his term ends.

However, sentiment has softened, and Bloomberg reported that markets now anticipate two rate cuts in 2025, down from three expected just a week earlier.

Fiona Cincotta, senior market analyst at City Index, noted that Wednesday’s decision may not be unanimous. “The focus will be on economic projections and the dot plot to provide further insight into the Fed's plans for next year. The market sees two rate cuts by the summer. Should the Fed’s dot plot differ from this, there could be volatility,” she wrote.

Xiao Cui, senior US economist at Pictet Wealth Management, said her team expects solid economic growth, persistent inflation, and a slowing labor market to intensify divisions among policymakers, making 2026 especially difficult. She anticipates another cut in December, followed by quarterly cuts in March and June, though she warned that rate reductions could be pushed into the second half of 2026.

Following a weaker session on Wall Street, most Asian markets mirrored the downturn. Hong Kong, Shanghai, Sydney, Seoul, Wellington, Taipei and Manila traded lower, while Tokyo, Singapore and Jakarta saw modest gains.

Tech and semiconductor stocks were mixed after Trump announced an agreement with Chinese President Xi Jinping that would allow Nvidia to sell advanced AI chips to China. The move marks a significant shift from the Biden administration’s strict export limitations, which required chipmakers to offer weakened versions of their products to China.

Japanese stocks such as Renesas and Advantest advanced, while South Korea’s Samsung and SK hynix slipped. TSMC also registered losses in Taipei.

Key market figures at around 0230 GMT

Tokyo – Nikkei 225: up 0.2 percent at 50,688.20
Hong Kong – Hang Seng Index: down 0.8 percent at 25,569.78
Shanghai – Composite: down 0.2 percent at 3,918.31
Dollar/yen: 155.90, slightly higher than 155.86 Monday
Euro/dollar: 1.1646, up from 1.1640
Pound/dollar: 1.3330, up from 1.3328
WTI: down 0.1 percent at $58.80
Brent: down 0.1 percent at $62.43
New York – Dow: down 0.5 percent at 47,739.32
London – FTSE 100: down 0.2 percent at 9,645.09