SINGAPORE: Asia stocks climbed on Tuesday (Sep 16) while the dollar was on the back foot as investors bet the United States Federal Reserve (Fed) would resume its easing cycle this week and potentially leave the door open to further rate cuts.
Markets hardly reacted to news that the US Senate narrowly confirmed Stephen Miran to the Fed’s Board of Governors, while a US appeals court separately declined to allow President Donald Trump to fire Fed Governor Lisa Cook.
Both moves were seen as unlikely to shift the needle for the Fed’s decision on Wednesday, where a 25-basis-point cut is fully priced in.
“There are certainly concerns around the politicisation of the Fed and President Trump’s pressure … to try to sort of, I guess, stack the board,” said Tony Sycamore, a market analyst at IG.
“But I think … a 25-basis-point cut still remains in place.”
Expectations of imminent Fed rate cuts have kept the market mood buoyant over the past few sessions and sent stocks scaling new highs.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose to a more than four-year top early on Tuesday and last traded 0.3 per cent higher, while Japan’s Nikkei and Topix indexes notched fresh records.
Just as important for markets will be Fed members’ “dot plot” projections for rates and guidance from Fed Chair Jerome Powell on the extent and pace of any further easing.
Futures already have 127 bps worth of cuts priced in by July 2026, so anything less than dovish will disappoint investors.
“There do seem to be quite a few rate cuts priced in now. On balance, maybe that suggests that the bar for a hawkish surprise is a little lower than that for a dovish one,” said Thomas Mathews, head of markets for Asia Pacific at Capital Economics.
“It’s likely though that the Fed will stick with its cautious communication approach and not give much away.”
EUROSTOXX 50 futures eased 0.09 per cent while FTSE futures gained 0.08 per cent.
Nasdaq futures were flat while S&P 500 futures dipped 0.02 per cent, after both indexes scaled all-time highs in the cash session overnight.
Shares of Nvidia ended slightly lower after China on Monday accused the artificial intelligence chipmaker of violating the country’s anti-monopoly law in the latest escalation in the Sino-US trade war.
In other news, US and Chinese officials said on Monday they have reached a framework agreement to switch short-video app TikTok to US-controlled ownership that will be confirmed in a Friday call between Trump and Chinese President Xi Jinping.
