Cooling Fed rate cut expectations dropped Asia

On Tuesday (22nd),Foreign exchange trading fraud cases the Asian-Pacific stock markets generally fell, with Japan's Nikkei 225 Index and South Korea's KOSPI Index both dropping by more than 1%. Taiwan's Weighted Index declined by 0.44%, while only Hong Kong stocks rose against the trend, with the Hang Seng Tech Index climbing nearly 1%. Growing investor concerns about the global economy were exacerbated by a series of speeches from Federal Reserve officials, significantly dampening expectations for future interest rate cuts, which triggered widespread market volatility.

The latest statements from several Federal Reserve officials led the market to reassess its expectations for monetary policy easing. Dallas Fed President Logan emphasized that future rate cuts by the Federal Reserve will be more gradual and not involve rapid aggressive easing measures. Kansas City Fed President Schmid, a voting member next year, also mentioned that facing global economic uncertainty, the Fed might need to slow down the rate of cuts. These statements influenced market expectations of Fed policy, making investors more cautious in the stock market.

From a macroeconomic perspective, the momentum of global economic recovery remains unstable, especially with ongoing inflationary pressures and high-interest rate environments in Western economies impacting market sentiment. Although the U.S. economic data has been stable, the sluggish economic growth of major European economies has raised investor concerns about the global economic outlook. The overnight U.S. stock market also underperformed, with both the Dow and the S&P 500 indices closing lower, while major European stock indices failed to avoid a downward trend.

Meanwhile, the CME's "FedWatch" tool indicates an 86.8% probability of a 25 basis point rate cut by the Federal Reserve in November, with a 13.2% chance of keeping rates unchanged. By December, the probability of a 50 basis point rate cut rises to 63.6%, indicating that the market still expects the Fed to take some easing measures by the end of the year, although the pace may not be as rapid as previously anticipated.

In the context of numerous global economic uncertainties, the trend of capital flows towards safe-haven assets such as gold and government bonds has become more pronounced, while high-risk assets like stocks are under greater downward pressure. As a vital part of the global market, the Asia-Pacific region is inevitably affected by this trend, particularly in major economies like Japan and South Korea, whose stock markets are constrained by global economic trends and domestic policy uncertainties.

Investors are currently paying close attention to the Federal Reserve's policy direction, especially in the context of slowing global economic growth and persistent inflation. Every policy decision by the Fed will have a profound impact on global financial markets. In the coming weeks, investors will continue to closely monitor U.S. economic data and speeches from Fed officials to gauge the future direction of monetary policy, which will also determine the next performance of the stock markets.

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.