Asian shares are mixed ahead of Fed interest rate decision

Asian Markets Mixed as Investors Eye Fed Decision, Regional Tensions

Asian markets delivered a mixed performance Monday as investors maintained a cautious stance ahead of a critical Federal Reserve interest rate decision expected this week. U.S. futures and oil prices edged higher during the session.

Market sentiment was dampened by escalating tensions between Japan and China after Chinese military aircraft locked radar on Japanese fighter jets. The incident comes weeks after comments about Taiwan by Japanese Prime Minister Sanae Takaichi stirred diplomatic friction with Beijing.

Japanese Defense Minister Shinjiro Koizumi confirmed that Japan had formally protested the radar-locking incident, describing it as “extremely regrettable” and “dangerous,” noting it “exceeded the scope necessary for safe aircraft operations.”

Tokyo’s benchmark Nikkei 225 index finished unchanged at 50,491.53. Adding to Japan’s economic concerns, revised government data released Monday showed that Japan’s economy contracted at a steeper annual pace of 2.3% in the July-September period, worse than the 1.8% annual rate previously reported. The downturn has been attributed partly to weakening exports affected by U.S. President Donald Trump’s tariffs, along with declining public investments.

Chinese markets showed divergent trends, with Hong Kong’s Hang Seng falling 1% to 25,835.99, while the Shanghai Composite index gained 0.6% to 3,927.19. Chinese leadership is preparing for a major annual economic policy planning conference in the coming days, which could influence market direction.

Elsewhere in the region, South Korea’s Kospi added 0.2% to 4,109.21, while Taiwan’s benchmark jumped 0.8%. Australia’s S&P/ASX 200 retreated 0.3% to 8,609.70.

Wall Street ended last week on a positive note, with the S&P 500 adding 0.2%, finishing just shy of its record closing level set in October. The Dow Jones Industrial Average and Nasdaq composite gained 0.2% and 0.3% respectively. The modest movements capped a relatively quiet week for U.S. markets, providing investors with some respite after weeks of volatility.

Corporate developments in the U.S. saw notable movements, with Ulta Beauty jumping 12.7% after reporting stronger-than-expected quarterly results. Media industry attention focused on Netflix’s announcement that it would acquire Warner Bros. for $72 billion in cash and stock pending its split from Discovery Global. Netflix shares fell 2.9% on the news, while Paramount Skydance, previously considered a frontrunner to acquire Warner Bros., sank 9.8%.

Market focus has now shifted to the Federal Reserve’s upcoming interest rate decision on Wednesday. The prevailing expectation among traders is that the Fed will implement its third rate cut of the year to bolster the slowing U.S. job market. While lower interest rates typically boost investment prices and economic activity, they also risk exacerbating inflation, which remains above the Fed’s 2% target.

Recent economic indicators have done little to alter expectations for an imminent rate cut. The Fed’s preferred underlying inflation measure showed inflation at 2.8% in September, matching economist forecasts. Additionally, U.S. consumer inflation expectations for the coming year have moderated to 4.1%, down from 4.5% last month – the lowest forecast since January.

In commodity markets, U.S. benchmark crude oil added 11 cents to $60.19 per barrel, while Brent crude, the international standard, also gained 11 cents to $63.86 per barrel. Currency markets saw the dollar slip slightly to 155.09 Japanese yen from 155.30 yen late Friday, while the euro rose marginally to $1.1651 from $1.1639.

As global markets navigate this complex landscape of monetary policy expectations and geopolitical tensions, investors remain watchful for signals that could indicate future economic direction across major economies.