Asian stocks rose for the fourth consecutive day, providing a contrast to the ongoing selloff in the US. While shares in Japan and South Korea saw gains, China’s stocks dropped, and Hong Kong’s market experienced fluctuations. Contracts for US stocks advanced after benchmarks slid on Tuesday. According to Bank of America Corp.’s latest survey, investors have sharply reduced their holdings of US equities, and cash levels have surged.
Rising Concerns Over US Economic Policies
Uncertainty surrounding President Donald Trump’s economic policies, particularly in relation to trade and tariffs, has raised fears of a potential recession. Investors are awaiting clarity from the Federal Reserve’s policy decision, scheduled for later Wednesday. Amid this uncertainty, traders have sought investment opportunities outside the US, with markets in China and Japan rallying in recent weeks.
Tim Waterer, chief market analyst at KCM Trade in Sydney, commented, “No news is good news” when it comes to tariffs, although underlying concerns remain about the potential impact of reciprocal tariffs on exporters across Asia.
Yen Stabilizes After Bank of Japan Holds Rates
The yen reversed its earlier losses after the Bank of Japan (BOJ) maintained its interest rates as expected. The BOJ highlighted a positive income-spending cycle, suggesting a path toward economic recovery. However, economists at Goldman Sachs noted that Japan’s wages must rise by at least 3% over the next two years to meet the BOJ’s sustainable inflation target.
Japan’s exports increased at a faster pace as businesses ramped up orders in anticipation of higher US tariffs. Meanwhile, Chinese banks have cut rates on consumer loans to record lows as part of efforts to stimulate growth and counteract the impact of US tariffs.
Market Concerns in Indonesia
In Indonesia, market instability continues as mass selloffs triggered circuit breakers and trading halts on Tuesday. The Jakarta Composite Index showed mixed results in early trading on Wednesday.
Mixed Performance in Hong Kong and Chinese Stocks
Shares of Xpeng Inc. declined after the electric vehicle maker’s volume guidance fell short of analyst expectations. In Hong Kong, tech firm Xiaomi Corp. showed fluctuations after reporting its fastest revenue growth since 2021, primarily driven by electric vehicles.
Investors are also awaiting earnings reports from major companies like Tencent Holdings Ltd., Anta Sports Products Ltd., and Muyuan Foods Co.
Commodities Market: Oil and Gold
In the commodities market, oil prices fell as broader market weakness and concerns about a global crude glut overshadowed tensions in the Middle East. Gold, which had hit a record high above $3,030 an ounce, pulled back slightly.
Fed’s Interest Rate Decision and Market Expectations
The Federal Reserve is expected to keep interest rates unchanged. Investors are closely watching the Fed’s quarterly dot plot for insights into the economic outlook. Fed Chair Jerome Powell’s press conference will be key, as he will need to balance communicating the central bank’s view on the economy with the potential impact of President Trump’s trade policies.
Kyle Rodda, senior market analyst at Capital.com, noted that amid a deteriorating economic backdrop caused by tariffs and trade uncertainty, the markets are hoping for “dovish guidance” and a lowered dot plot in the Fed’s updated Summary of Economic Projections.
US Stock Market Movements
US Treasury yields rose, and the US dollar steadied. Despite better-than-expected factory output data easing concerns about weakening manufacturing, market uncertainties, including the Fed’s decision and geopolitical tensions, overshadowed positive economic reports. On Tuesday, the S&P 500 fell by 1.1%, while the Nasdaq 100 dropped by 1.7%. Major tech stocks, including Nvidia Corp., Tesla Inc., and Meta Platforms Inc., saw significant losses.
Options traders are pricing in a 1.2% move in the S&P 500 on Wednesday, higher than the average 0.8% move seen during previous Fed meetings, according to Citigroup’s Stuart Kaiser.
Fed Days and Historical Trends
Bespoke Investment Group strategists noted that historically, when the Fed leaves rates unchanged, markets tend to experience solid gains. This raises expectations for potential positive movement on Wednesday, despite the current market volatility.
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