Asia-Pacific markets were mixed on Tuesday after U.S. Federal Reserve Chair Jerome Powell signalled that future rate cuts by the central bank may be smaller.
“This is not a committee that feels like it’s in a hurry to cut rates quickly,” Powell said during a Q&A session after his speech, adding that if the U.S. economy performs as expected, two more rate cuts of 25 basis points each are anticipated this year, bringing the federal funds rate to a range of 4.25% to 4.5% by the end of 2024. The current rate stands between 4.75% and 5%.
Due to public holidays, markets in South Korea, Hong Kong, and mainland China were closed on Tuesday, with China’s markets remaining closed for the week in observance of the Golden Week holiday.
Meanwhile, traders in Asia focused on Japan’s economic outlook, with the Bank of Japan (BOJ) releasing its third-quarter Tankan survey.
Business optimism among major Japanese manufacturers remained stable at 13, consistent with the previous quarter and meeting market expectations. However, sentiment among large non-manufacturers slightly improved, rising to 34 from 33, exceeding the anticipated 32.
The BOJ also published a summary of opinions from its September 19-20 meeting, revealing that one board member viewed a potential rate hike as “undesirable,” signaling that Japan may not be on the verge of a full-fledged tightening cycle.
Another member expressed that Japan’s economy would not face significant risks if the BOJ refrained from raising rates at a rapid pace, especially given the current instability in financial and capital markets.
In other economic news, Japan’s unemployment rate for August dropped to 2.5%, down from 2.7% in July and better than the 2.6% expected.
In Japan, the Nikkei 225 rebounded 1.9% after experiencing a sharp 4.8% drop on Monday, while the broader Topix index gained 1.4%.
In Australia, the S&P/ASX 200 slipped by 0.8%, pulling back from its recent all-time high.
Overnight, U.S. markets ended on a positive note. The S&P 500 closed at a record high, rising 0.4% to finish at 5,762.5, while the Dow Jones Industrial Average marginally increased to a new record of 42,330.2. The tech-heavy Nasdaq Composite advanced 0.4%.