Asian stocks weakened in Tuesday's trading as market participants began to worry about the direction of the Fed's future policy easing, not just the near-certain interest rate cut this week. The MSCI Asia Index fell around 0.2%, with Korean, Japanese, and Australian markets opening lower. Meanwhile, US stock futures actually gained slightly after the S&P 500 fell 0.3% on Monday and US bond yields rose, in line with the decline in global bond prices. Australian bond yields also rose ahead of the local central bank's interest rate decision.

The main market focus is the Fed's decision on Wednesday, which is widely expected to cut interest rates by 25 basis points. However, concerns have arisen that the Fed could signal a slower pace of further cuts, given persistently high inflation and the lack of new data during the government shutdown that has divided the views of Fed officials. Currently, the financial market is only pricing in two additional cuts by the end of 2026, down from the three predicted nearly a week ago. Oxford Economics analyst John Canavan even said this cut would likely be accompanied by a hawkish tone and the potential for a longer pause next year.

On the corporate front, Asian chip stocks also came under scrutiny after Nvidia was granted permission by President Donald Trump to ship its H200 AI chip to China in exchange for a 25% sales cut, sending the company's shares up in after-hours trading. On Wall Street, corporate tensions escalated after Paramount Skydance launched a hostile takeover bid for Warner Bros. Discovery for $30 per share in cash, valuing the company at around $108.4 billion including debt. In commodity markets, gold, silver, copper, and oil prices stabilized after Monday's correction, with crude falling about 2% due to focus on Russian exports to India.

Elsewhere, the yen stabilized after weakening following a 7.6 magnitude earthquake that struck Japan's northeast coast. Japanese bond yields rose across all tenors after data showed the Japanese economy contracted in the three months to September, further justifying Prime Minister Sanae Takaichi's stimulus package. However, this is not expected to shift the Bank of Japan's plan, which is currently on a gradual normalization path. In China, Beijing emphasized strengthening domestic demand as an economic priority for 2026 with a measured stimulus approach. In global bond markets, the 10-year US Treasury yield hit its highest level since September, extending pressure in Europe and Japan while supporting the strengthening of the US dollar, amid a series of large-dollar bond auctions that indicated demand remained quite solid. (az)

Source: Newsmaker.id