Asia Day Ahead: Countdown to FOMC meeting
The major risk event ahead with the upcoming FOMC meeting will likely drive some reluctance among market participants to commit to any major moves for now.
Asia Open
The Asian session looks set to tread water in today’s session, with Nikkei -0.10%, ASX +0.11% and NZX -0.70% at the time of writing. The major risk event ahead with the upcoming Federal Open Market Committee (FOMC) meeting will likely drive some reluctance among market participants to commit to any major moves for now, as policy clarity from the Federal Reserve (Fed) awaits. Markets in mainland China, South Korea and Taiwan are closed for holidays as well, which could put some volume on the sidelines.
All eyes on FOMC meeting ahead
Overnight, Wall Street’s mixed performance may still reveal some appetite for risk-taking, with sector rotation towards value being eyed. That said, the recent huge swings in Fed rate probability reflect how malleable expectations can be in terms of the Fed’s rate outlook, as mixed economic data seems to provide the case for either outcome (25 basis point (bp) or 50 bp).
For now, a 50 bp Fed rate cut is the broad consensus (62% probability), but focus will likely extend way beyond how much the Fed will cut this week. If the Fed opts for a conservative 25 bp cut this time round, question will be whether the Fed will open the door for more aggressive cuts ahead. The rationale behind the cuts is key as well. In the event of a larger 50 bp cut, policymakers will walk a thin line in trying to reassure market participants that larger cuts are to bring rates back to neutral, rather than a reaction to greater economic risks.
Nikkei 225, Hang Seng Index
More dovish rate expectations have put the US dollar (-0.4%) on the backfoot, as US Treasury yields headed for a multi-month low. The US 10-year yields are at its lowest since June 2023. With the Bank of Japan (BoJ) meeting up ahead this week, that has put the US-Japan policy divergence back in the limelight as well, which saw the yen gaining some ground lately. Any dovish surprise from the Fed could further drag on the USD/JPY, which at first glance may translate to some pressures for Japan’s exporters. However, overall impact will likely be more mixed for the Nikkei, as the index has managed to form a higher low since August this year, despite the USD/JPY forming a lower low.
Aside, the Hang Seng Index (HSI) has managed to stabilise lately, despite a recent run of weaker-than-expected economic data out of China which revealed that its economic woes are far from over. While this could reflect that much bearishness has been priced currently, it will also likely have to take more in order to see a significant reversal for the index.
ASX 200 still looking for a break to record territory
Aside, the Australian Securities Exchange (ASX) continues to hang around its 1 August high, still finding the catalyst for a fresh break to record territory. A move to record will likely leave the 8,300 level on watch next, where an upward trendline resistance stands. On the downside, the 7,936 level may serve as near-term support to hold in the event of a near-term reversal. For now, buyers seem to retain control, with its daily relative strength index (RSI) trading above its mid-line, while the index hangs above several key trend indicators (moving averages (MAs), Ichimoku Cloud).
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
