The Japan Times - Stocks, dollar calm ahead of expected US rate cut

Traders took a breather from the global rally that lifted several equity indexes to record highs over recent weeks, as they anticipate the Fed decision and post-meeting comments by bank boss Jerome Powell.

The Dow rose at the opening bell on Wall Street, but the S&P 500 and Nasdaq Composite were flat.

In Europe, London and Frankfurt stocks rose in afternoon trading, while Paris dipped.

"The Fed meeting... is one of the most hotly anticipated for the year so far," said Kathleen Brooks, research director at XTB trading group.

While a 25-basis-point reduction -- the first of 2025 -- has been baked into valuations for some time, the main debate has revolved around how many more are in the pipeline and how big they will be.

"(Donald) Trump will be central to this meeting," Brooks said, citing the pressure the US president has put on the Powell and the Fed to cut rates.

Expectations for an extended period of easing have grown out of a string of data showing the US labour market is not as healthy as first thought.

That comes even as inflation remains stubbornly above the Fed's two-percent target, though the feared spike in prices caused by Trump's tariff war has not fully materialised.

Economists expect to see divisions among decision-makers as they try to walk the line between tempering inflation and supporting jobs.

Investors will be looking to the Fed's updated Summary of Economic Projections (SEP), released after the meeting, to get an idea whether the Fed's monetary policy committee's voting members see a similar pace of interest rate cuts.

The Fed Funds futures market sees two more rate cuts this year and three in 2026.

Investors will also be listening to what message Fed Chair Jerome Powell delivers after the meeting.

"The market wants some tacit assurances that this is not a one-and-done rate cut," said Briefing.com analyst Patrick O'Hare.

In particular, investors will be listening to whether the Fed is currently worried more about employment or price stability, said O'Hare, and are hoping to hear more about concerns about labour market weakness.

"Failing that, and a projected pathway for two more rate cuts this year and at least three cuts next year, there will be room for disappointment in the price action," he said.

In Britain, data showing UK inflation held at 3.8 percent in August reinforced expectations that the Bank of England will maintain its key rate on Thursday and for the remainder of 2025.

The Bank of Canada cut its key lending rate as expected on Wednesday.

Asian stocks traded mixed, after Tuesday's tepid showing on Wall Street.

Hong Kong led gains, climbing more than one percent thanks to a rally across Chinese tech giants such as Alibaba, JD.com and Tencent.

Shanghai advanced while Tokyo closed down.

Gold prices retreated from their record above $3,700 an ounce reached Tuesday, as the likelihood of lower US interest rates makes the precious metal more attractive to investors.

The impact of Trump's tariffs on Japan were revealed Wednesday by data showing the country's exports to the United States plunged almost 14 percent last month, the biggest drop since 2021.

The fall included a collapse of more than 28 percent in auto shipments, dealing a blow to a crucial driver of the world's fourth-largest economy.

- Key figures at around 1330 GMT -

New York - Dow: UP 0.3 percent at 45,908.11 points

New York - S&P 500: UP less than 0.1 percent at 6,609.93

New York - Nasdaq: FLAT at 22,329.29

London - FTSE 100: UP 0.3 percent at 9,224.62

Paris - CAC 40: DOWN 0.2 percent at 7,800.05

Frankfurt - DAX: UP 0.3 percent at 23,407.85

Tokyo - Nikkei 225: DOWN 0.3 percent at 44,790.38 (close)

Shanghai - Composite: UP 0.4 percent at 3,876.34 (close)

Hong Kong - Hang Seng Index: UP 1.8 percent at 26,908.39 (close)

Euro/dollar: DOWN at $1.1847 from $1.1868 on Tuesday

Pound/dollar: DOWN at $1.3651 from $1.3657

Dollar/yen: DOWN at 146.33 yen from 146.49 yen

Euro/pound: DOWN at 86.80 pence from 86.87 pence

West Texas Intermediate: DOWN 0.2 percent at $64.41 per barrel

Brent North Sea Crude: DOWN 0.2 percent at $68.36 per barrel

burs-rl/cw

M.Yamazaki--JT