Asian Stocks Fluctuate With Fed’s Pace in Focus: Markets Wrap

(Bloomberg) -- Asian shares struggled for direction in early trade, reflecting subdued risk appetite as traders mulled the prospect of less aggressive Federal Reserve interest rate cuts.

Stocks moved between losses and gains in Japan and South Korea, with those in Australia modestly higher. Futures pointed to gains in Hong Kong. US contracts were flat after the S&P 500 closed little changed. Treasury 10-year yields hovered near 4.2% after topping that level for the first time since July.

The lackluster performance of equities comes as investors have pared back bets on rapid policy easing as the US economy remains robust and concerns rise about wider fiscal deficits after the presidential election. Since the end of last week, traders have trimmed the extent of expected Fed cuts through September 2025 by more than 10 basis points.

In Asia, the stamina of China’s recent stock rally continues to draw attention, after a top government-linked think tank called on authorities to issue 2 trillion yuan ($281 billion) of special government bonds to help create a market stabilization fund. 

“The recent rise in bond yields is likely due to the market adjusting to the increasing probability of a Trump election victory and the higher inflation and fiscal spending it will bring,” said Tony Sycamore, a market analyst at IG Australia. “Equities are unlikely to respond well if yields were to resume their march higher in the sessions ahead.”

The US stock market has rallied this year thanks to a resilient economy, strong corporate profits and speculation about artificial-intelligence breakthroughs — sending the S&P 500 up over 20%. Yet risks keep surfacing: from a tight US election to war in the Middle East and uncertainty around the trajectory of Fed easing.

Most Fed officials speaking earlier this week signaled they favor a slower tempo of rate reductions. Policymakers at their meeting last month began lowering rates for the first time since the onset of the pandemic. They cut their benchmark by a half percentage point, to a range of 4.75% to 5%, as concern mounted that the labor market was deteriorating and as inflation cooled close to the Fed’s 2% goal. 

In currency markets, the dollar was steady in Asia after the euro hit the lowest since early August amid bets the European Central Bank will keep lowering rates.

The International Monetary Fund lowered its global growth forecast for next year and warned of accelerating risks from wars to trade protectionism, even as it credited central banks for taming inflation without sending nations into recession.

Meanwhile, Japan’s 40-year government bond yield climbed to its highest level in 16 years amid growing speculation that the nation’s central bank will push ahead with interest rate increases in coming months. 

Still in Japan, Tokyo Metro Co.’s shares rose 36% in their debut. The company raised 348.6 billion yen ($2.3 billion) in the country’s largest initial public offering since mobile carrier SoftBank Corp. listed in 2018.

Oil fell as a US industry group signaled a rise in nationwide crude inventories, and the Biden administration renewed efforts to secure a cease-fire in the Middle East. Gold was little changed after climbing to a fresh record.

Elsewhere, options traders are increasing bets that Bitcoin will reach $80,000 by the end of November no matter who wins the US election.

In corporate news, Texas Instruments Inc. gave a downbeat outlook for the current period even after topping estimates. Starbucks Corp. pulled guidance for 2025 after sales plunged for a third consecutive quarter. McDonald’s Corp. slumped as its Quarter Pounders were linked to an E. Coli outbreak in the western part of the US.

Key events this week:

Some of the main moves in markets:

Stocks

Currencies

Cryptocurrencies

Bonds

Commodities

This story was produced with the assistance of Bloomberg Automation.

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