Asian Markets Pause Rally as Investors Eye Fed Rate Cuts

Investors in Asian markets adopted a cautious stance on Friday, pausing after a significant rally earlier in the week. The breather came as traders assessed the market's healthy rebound, which was fueled by growing anticipation of another interest rate cut from the US Federal Reserve next month.

Focus Shifts to US Economic Data

With US markets closed for the Thanksgiving holiday, the lack of a lead from Wall Street gave traders room to reflect. The recent market upswing has been primarily driven by comments from several top Fed officials who have backed a third consecutive rate cut in December. Their consensus suggests that concerns about a softening US labour market are currently outweighing worries about still-elevated inflation.

Attention is now sharply focused on a series of key US economic reports due for release. These include data on private hiring, services activity, and the Personal Consumption Expenditure (PCE) index, which is the Fed's preferred measure of inflation. This data will be critical in shaping the central bank's final policy decision on December 10.

Data Delays Add to Uncertainty

Compounding the situation, a recent US government shutdown has disrupted the release schedule for some vital statistics. Notably, the highly influential non-farm payrolls report has been delayed until mid-December, which is after the Fed's upcoming meeting.

This delay places immense importance on the next ADP private payrolls report. Michael Hewson of Market Insights noted that a Thanksgiving-linked spike in hiring is expected, which may not reflect the broader, slower trend in the job market. He added, "While a big jump in payrolls in November could be construed as a positive signal... it might not be enough to stop the Fed from cutting rates again." Markets are currently pricing in an 85% chance of a rate cut in December, with three more anticipated in 2026.

Mixed Performance Across Asian Bourses

Without a strong catalyst from New York, trading in Asia was mixed as the week drew to a close. Key indices in Hong Kong, Shanghai, Seoul, and Jakarta all retreated. Tokyo's market finished marginally lower. Meanwhile, Sydney, Singapore, Taipei, and Wellington managed to eke out modest gains.

In currency markets, the Japanese yen experienced fluctuations against the US dollar. This movement followed the release of inflation data for Tokyo, a national bellwether, which came in slightly higher than forecasts. The figures have reignited discussions on whether the Bank of Japan might consider raising interest rates in the coming months. Despite this, the yen remains under pressure due to concerns about Japan's fiscal outlook.

Key market figures as of 0230 GMT were: