Asian markets mixed ahead of US data, expected Fed rate cut

[HONG KONG] Asian markets struggled into the weekend on Friday (Dec 5) following a bland lead from Wall Street as a mixed bag of US data did little to move the needle on expectations the Federal Reserve will cut interest rates next week.

Investors have in recent sessions struggled to match last week’s healthy gains fuelled by comments from central bank officials indicating their preference for a further easing of monetary policy.

However, optimism has been helped by reports reinforcing the view that the jobs market is softening, including payrolls firm ADP saying more than 30,000 posts were lost in November.

And while figures on Thursday on jobless claims and layoffs came in slightly better than expected, markets have priced the chances of a rate cut on Wednesday at around 90 per cent.

Focus is now on the release later Friday of the personal consumption expenditures (PCE) index, the Fed’s preferred gauge of inflation, with a below-forecast reading tipped to ramp up hopes for several more rate reductions in 2026.

Data on income and spending is also due to come out.

Still, debate continues to swirl over the bank’s plans for the next 12 months as inflation remains stubbornly above target.

“While the US labour market is showing signs of slowing with the latest ADP report seeing a decline in hiring, there is a sense that it is still reasonably resilient,” said Michael Hewson at MCH Market Insights.

With key jobs creation data not due until after the Fed’s decision, “any further move to cut rates by another 25 basis points could well be a leap of faith on the part of some members of the committee”, he wrote.

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He warned that “markets are pricing in the likelihood of another cut, which means any delay could prompt a significant adverse reaction”.

“Of course, there is another scenario where the Fed cuts rates, but then signals a pause as it looks to assess the effect that three successive rate cuts have had on the US economy.”

Wall Street ended on a tepid note, with the S&P 500 and Nasdaq slightly higher but the Dow marginally off.

Tokyo shed more than one per cent, having jumped more than two per cent on Thursday, while Hong Kong, Shanghai, Singapore and Wellington were also off. Sydney, Seoul, Taipei, Manila and Jakarta edged up.

In corporate news, Chinese artificial intelligence chip maker Moore Threads Technology soared more than 450 per cent on its debut in Shanghai after raising US$1.13 billion in an initial public offering. AFP