Asian stock markets traded cautiously on Monday (Dec 8) as investors braced for an anticipated US interest rate cut later this week, with ongoing debates over whether the Federal Reserve will continue easing monetary policy into the new year.
The expected rate reduction has been largely priced into the market, following a series of remarks from key Fed officials last month and data showing the US labor market is weakening. However, lingering concerns about inflation and softening consumer confidence have raised questions over how much room the Fed has to continue its policy cuts.
The latest inflation data, specifically the delayed September Personal Consumption Expenditure (PCE) index—the Fed's preferred inflation gauge—came in slightly above August’s reading, with the core inflation figure remaining unchanged. While the data did little to alter market expectations for rate cuts, it highlighted that inflation is still stubbornly above the Fed’s target.
Economists at Bank of America (BOA) noted that the Fed’s blackout period for policy comments ends on Thursday, and they will be closely watching for any dissenting voices. They also pointed out that there are several key economic reports to be released between Wednesday’s rate decision and the next Federal Reserve meeting in January, including three non-farm payrolls reports, two unemployment figures, multiple inflation readings, and retail sales data for October, November, and potentially December.
“We expect two or three substantive changes in the Fed’s statement, with likely revisions to the description of labor market conditions. The language about the unemployment rate ‘remaining low’ will probably be removed, reflecting the recent 32-basis-point rise in unemployment over the past three months,” the BOA team stated.
In addition to concerns about US monetary policy, traders are keeping a wary eye on rising tensions between China and Japan, which have added to the cautious sentiment in Asia. The fallout from the recent diplomatic row, including military incidents and trade uncertainties, is compounding investor uncertainty, making for a volatile market environment heading into the year’s end.
As a result, regional equity indices showed little movement, with investors weighing both the Fed’s actions and geopolitical risks that could shape the outlook for global markets.
Source: BusinessTimes (SG)
Bd-pratidin English/ Jisan
