Hong Kong,
Asian equities fell Monday as investors braced for an expected interest rate cut in the United States this week, with debate centred on whether the Federal Reserve will continue to ease monetary policy in the new year.
Following a series of comments from key decision-makers since last month, as well as data indicating that the labour market is deteriorating, the reduction has been well baked into traders' plans.
However, with the latest round of inflation figures indicating that there is still much work to be done to bring prices under control and consumer confidence eroding, there are concerns that the central bank may not have enough room to continue cutting.
The latest, and delayed, reading on September personal consumption expenditure (PCE), the Fed's preferred measure of inflation, was slightly higher than August, but the core reading remained unchanged.
The data did little to move the needle on interest rate expectations, but it revealed that it remains stubbornly above officials' target.
Bank of America economists said a blackout period for Fed members commenting on policy would end on Thursday, and "we'll be on the lookout for what potential dissenters have to say."
With the backlog from the government shutdown cleared, the BoA team noted that several key releases occurred between Wednesday's decision and the next meeting in January.
This includes three nonfarm payroll prints, two unemployment reports, two inflation releases, and retail sales for October, November, and possibly December.
"We are looking for two or three substantive changes to the (policy board) statement. The description of labour market conditions is likely to omit the language that the unemployment rate 'remained low', to reflect the 32-basis-point increase over the last three months," they wrote.
"The forward guidance language could also be changed to indicate that the threshold for further cuts has risen. This would be a nod towards the hawks.
"Markets are expecting a hawkish cut, as they are pricing in less than eight basis points of cuts in January and less than a full 25 points in the first three meetings of 2026 (when Jerome Powell's term as Chair ends)."
Last week, all three major indexes on Wall Street closed on a high note, but Asia struggled to keep up.
Tokyo was slightly lower, while Hong Kong, Sydney, and Singapore were in the red. Shanghai, Seoul, Wellington, and Taipei all rose.
Traders are also keeping a close eye on China-Japan tensions, following reports that Tokyo summoned Beijing's ambassador after Chinese military aircraft locked radar on Japanese aircraft.
Relations have deteriorated since Japan's Prime Minister, Sanae Takaichi, suggested last month that Japan would intervene militarily in any Chinese attack on Taiwan.
According to Tokyo, J-15 jets from China's Liaoning aircraft carrier locked radar on Japanese aircraft twice on Saturday in international waters near Okinawa.
China's navy stated that Tokyo's claim was "completely inconsistent with the facts" and instructed Japan to "immediately stop slandering and smearing."
Key figures at approximately 0230 GMT -
Tokyo - Nikkei 225: FLAT at 50,473.84 (break)
Hong Kong - Hang Seng Index: Down 0.6 per cent at 25,919.77.
Shanghai Composite: Up 0.6 per cent to 3,925.12
Dollar/yen: Down to 154.96 yen from 155.32 yen on Friday.
Euro/dollar: Up to $1.1653 from $1.1642.
Pound/dollar: Up to $1.3333 from $1.3329.
Euro/pound: Up to 87.38 pence from 87.35 pence.
West Texas Intermediate is flat at $60.07 per barrel.
Brent North Sea Crude is flat at $63.74 per barrel.
New York - Dow: Up 0.2% at 47,954.99 (close)
London - FTSE 100: Down 0.5% at 9,667.01 (close)
