Asian Stocks Slip as Markets Brace for Fed Decision; Yen Steady After Japan Quake

 Asian equities slipped on Tuesday while the US dollar held steady, as investors positioned cautiously ahead of a widely expected Federal Reserve rate cut this week. The Japanese yen was calm after a magnitude-7.5 earthquake struck northeastern Japan, with limited market impact.

Sentiment was subdued across the region as traders looked ahead to a series of central bank decisions. The Reserve Bank of Australia, Swiss National Bank, and Bank of Canada are all expected to keep rates unchanged, while the Fed is set to deliver a quarter-point cut on Wednesday.

The market’s focus, however, is shifting toward the pace of easing in 2026. Many major Wall Street banks expect fewer cuts next year due to persistent inflation concerns and stronger-than-anticipated US economic resilience.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.28% after a weak session on Wall Street. Japan’s Nikkei edged down 0.08%, and South Korea’s Kospi declined 0.58%.

Fed Outlook: Cautious Tone Expected

“The low-hanging fruit from risk management cuts is likely over,” said Prashant Newnaha of TD Securities. He expects Fed Chair Jerome Powell to adopt a “more cautious tone” regarding future policy changes.

Traders are pricing in 77 basis points of total easing for 2026, LSEG data shows.

Markets are also watching closely for clues on who will succeed Powell when his term ends in May. White House economic adviser Kevin Hassett, considered a top candidate for the role, recently said the Fed should continue lowering interest rates.

Goldman Sachs economist David Mericle said the Fed may raise the bar for additional cuts, noting the committee is working with outdated labor market data because of reporting delays. “A January cut could turn out to be appropriate,” he added.

Asian Chip Stocks Soften After Trump Comments

Semiconductor shares in Asia weakened after President Donald Trump said the US would allow Nvidia’s H200 AI chipsto be exported to China, subject to a 25% fee. China’s CSI Semiconductor Index fell about 1% in early trading.

Currency and Commodity Markets

The US dollar was stable:

• Dollar index: 99.09

• Euro: US$1.1640

• Sterling: US$1.33225

• Australian dollar: US$0.6625 ahead of the RBA meeting

• Yen: 155.87 per dollar

The yen’s earlier dip after the earthquake was short-lived. Japanese authorities lifted tsunami warnings hours after the quake, which injured at least 30 people and displaced 90,000 residents.

In commodities:

• Gold: up 0.13% to US$4,194.11 per ounce

• Brent crude: flat at US$62.48

• WTI: US$58.84, down 0.07%

Oil steadied after a 2% drop in the previous session as markets tracked peace negotiations related to Russia’s war in Ukraine.

Key Takeaways

• Asian shares slipped with investors cautious ahead of the Fed’s expected rate cut this week.

• Market focus is on the Fed’s 2026 easing path, with expectations for fewer cuts than previously thought.

• Japan’s Nikkei softened slightly; the yen stabilised after the earthquake with limited financial impact.

• Semiconductor stocks in China fell after Trump allowed Nvidia’s H200 chips to be exported to China with a 25% fee.

• The US dollar held firm while gold edged higher; oil prices were little changed.

• Global central banks including the RBA, SNB and BoC are expected to hold rates steady this week.