GLOBAL MARKETS-Stocks hesitant in Asia, with a lot riding on Fed decision

Asian shares steadied near four-year highs on Monday ahead of an action-packed week that is seemingly certain to see the U.S. Federal Reserve resume its easing cycle, and perhaps leave the door wide open to a series of cuts. The Bank of Canada is also expected to cut rates by a quarter point this week, while the Bank of Japan and the Bank of England also meet and are both expected to hold rates steady.

European stocks are headed for a slightly firmer open, with EUROSTOXX 50 futures 0.3% higher. S&P 500 futures and Nasdaq futures were both up 0.1%. Markets are 100% priced for an easing of 25 basis points from the Fed, taking its funds rate to 4.0-4.25%, with futures implying just a 4% chance of 50 basis points.

Just as important will be Fed members' "dot plot" projections for rates and guidance from Fed Chair Jerome Powell on the extent and pace of any further easing. Futures already have 125 basis points of cuts priced in by late 2026, so anything less than dovish will disappoint investors.

"The key question for the September FOMC meeting is whether the Committee will signal that this is likely the first in a series of consecutive cuts," said David Mericle, chief U.S. economist at Goldman Sachs. "We expect the statement to acknowledge the softening in the labor market but do not expect a change to the policy guidance or a nod to an October cut."

U.S. President Donald Trump continued his attacks on the central bank on Sunday, saying Powell was incompetent and hurting the housing market. A holiday in Japan made for some thin trading conditions in Asia on Monday, with the euro showing scant reaction to Fitch's downgrade of France.

The single currency was holding steady at $1.1732, a short way from its recent top of $1.1780. The dollar was off 0.15% on the yen at 147.44, but well within the 146.22 to 149.13 range of the past month or so. The euro has been underpinned by a steady outlook for EU rates, with the European Central Bank signalling last week it was in a "good place" on policy. A host of ECB officials are due to speak this week, including President Christine Lagarde.

CHINA DATA MISSES While the Nikkei was shut for the holiday, futures stood at 44,520, just below the cash close of 44,768, having climbed more than 4% last week.

MSCI's broadest index of Asia-Pacific shares outside Japan was last flat, although it did hit a new four-year high earlier in the session. South Korea's market rose 0.4% to hit another record high after the government scrapped a plan to raise taxes on stock investment.

Chinese shares outperformed, with blue chips up 0.5% and Hong Kong's Hang Seng index 0.2% higher as investors redoubled bets on Chinese tech shares amid Sino-U.S. trade talks. U.S. and Chinese officials concluded a first day of talks in Madrid on Sunday on their strained trade ties, and will resume them later on Monday. Trump said he was still negotiating on the divestiture deadline for Chinese short-video app TikTok.

Data released on Monday showed the Chinese economy lost some momentum in August, with a slew of activity indicators - from industrial output to retail sales - coming below forecasts. Falls in property investment deepened, while home prices declined another 0.3% in August, extending a downward trend that has persisted since early 2023. "Given the slowdown of the past few months, we expect that there's a strong case for additional short-term stimulus efforts," said Lynn Song, ING's chief economist, Greater China.

"We continue to see a high possibility for another 10bp rate cut and 50bp reserve-requirement-ratio cut in the coming weeks." In the commodities market, oil prices extended gains on Monday as investors assessed the impact of Ukrainian drone attacks on Russian refineries that could disrupt its crude and fuel exports.

Brent rose 0.5% to $67.33 a barrel, while U.S. crude firmed 0.5% to $63 per barrel. Gold was flat at $3,644 an ounce, not far from last week's all-time high of $3,673.95.

The cash Treasuries market was closed due to the holiday in Japan. Yields on 10-year Treasuries last stood at 4.07%, having hit a five-month low of 3.994% last week as a run of soft labour data added to the case for aggressive Fed easing.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)