Benchmark share indexes in Japan and South Korea both gained, while US equity futures were little changed after the S&P 500 closed almost flat Tuesday. The Treasury 10-year yield hovered at around 4.18% following an auction of the securities on Tuesday, while the dollar was mixed against its major peers.
Traders are anticipating a third consecutive Fed rate cut Wednesday, while the focus will be on the central bank’s latest dot plot, economic projections and comments from Chair Jerome Powell. Volatility around the decision has been among the defining characteristics of equity trading in the past six weeks, superseding concern about a potential AI bubble and the impact of President Donald Trump’s trade policies.
Money markets are pricing around two Fed cuts in 2026 after a likely quarter-point reduction on Wednesday, a retreat from more optimistic forecasts in recent weeks.
“It’s not too much of an exaggeration to say that the rate cut is actually the least important part of this meeting,” said Tom Essaye, the founder of The Sevens Report. The market “cares much more that the Fed signals it will continue to cut rates and does not signal a pause in the rate-cut cycle,” he said.
Treasury yields climbed from earlier lows Tuesday after data showed October US job openings increased to the highest level in five months. The Fed’s two previous cuts this year were intended to address weakening employment conditions, including a rise in the unemployment rate to nearly 4.5%.Kevin Hassett, the frontrunner in Trump’s search to replace Powell, said on Tuesday that he sees plenty of room to substantially lower rates, even more than a quarter-point cut.“If the Fed is too hawkish, we expect the White House to soon announce Powell’s replacement,” said Fundstrat’s Tom Lee. That would be a “market clearing event” in his view.
In Asia, market watchers will be focusing on the yen after Bank of Japan Governor Kazuo Ueda said the central bank is getting closer to attaining its inflation target, adding to signals that the BOJ may raise its interest rate at a policy meeting next week.
The yen strengthened a touch as Ueda’s comments were streamed, briefly dipping below the 156 mark against the dollar.
Globally, government debt markets have been under pressure as central bankers signal that their easing cycles are coming to an end. On Tuesday, Australia’s Michele Bullock declared her country’s easing phase over, following comments from the European Central Bank’s Isabel Schnabel that she’s comfortable with the next move being higher.
“Given all the tension in global bond markets at the moment, the meeting of the Fed could potentially add fuel to the fire,” said Vincent Juvyns, chief investment strategist at ING in Brussels. “Investors will also be watching very closely the results of Oracle and Broadcom. There’s a lot at stake this week.”
In commodities, silver topped $60 an ounce on Tuesday for the first time on continued supply tightness. Gold also climbed.
