Asian Stock Markets Retreat as Investors Await Fed Decision on Interest Rates

Asian stock markets experienced a pullback as they retreated from recent highs, following Wall Street’s 15-month peak. Investors were cautiously awaiting the outcome of the Federal Reserve’s meeting, hoping for a potential final increase in the interest rate cycle. The cautious sentiment extended to major Asian markets, including Shanghai, Tokyo, Hong Kong, and Seoul, which all reported declines. Additionally, oil prices also experienced a retreat.

On Tuesday, Wall Street’s benchmark S&P 500 index managed a 0.3% gain, bolstered by companies reporting better-than-expected profits. Nevertheless, investors remained focused on the Federal Reserve’s impending decision to raise its key lending rate by 0.25 percentage points, possibly reaching a 22-year high. The primary aim of this anticipated rate hike is to tackle inflationary pressures while ensuring the avoidance of a recession.

Experts speculated that this rate increase could possibly be the last, as inflationary pressures have begun to ease. Central banks in Europe and Japan are also nearing their pivot points, indicating potential stability in their respective rate hike cycles.

Meanwhile, market participants were keenly observing China’s response to its sluggish economic growth. The country’s ruling Communist Party made assurances to support entrepreneurs and the struggling real estate industry, but specific details were lacking, creating uncertainty among traders.

Hong Kong’s Hang Seng index, which surged 4.1% following China’s announcement, retraced some gains with a 0.6% decline. Similarly, the Shanghai Composite Index saw a 0.2% decline after a 2.1% rise in the previous session. Tokyo’s Nikkei 225 and Seoul’s Kospi also experienced slight losses.

In Australia, the S&P-ASX 200 performed well, surging 1% after a report showed that inflation had eased in June, reducing pressure on the central bank to implement further interest rate hikes.

On Wall Street, several companies reported positive earnings, leading to gains for the S&P 500 and Nasdaq composite. General Electric and 3M both saw significant increases in their stock prices after raising their profit forecasts. Home builder PulteGroup also performed well after reporting stronger-than-expected profits.

While the U.S. job market remained robust, contributing to consumer confidence and sustained spending, investors are closely monitoring about 30% of companies in the S&P 500 that are due to report their earnings this week.

In the energy markets, benchmark U.S. crude and Brent crude experienced fluctuations, and the dollar maintained stability against the yen while gaining slightly against the euro.

The prevailing sentiment among investors remains cautious as they eagerly await the Federal Reserve’s decision on interest rates and China’s concrete measures to boost economic growth.