Asian stocks remained stable early Tuesday following a mixed session on Wall Street, where traders increased their bets on the Federal Reserve delivering a half-point rate cut this week.

Equity markets in Sydney and Tokyo experienced fluctuations. After the S&P 500 closed 0.1% higher and the Nasdaq 100 slid 0.5%, futures for US stocks showed little change as investors continued to shift away from the tech mega caps that have been driving the bull market in stocks. China and South Korea’s markets were closed for public holidays.

Since January, the dollar has maintained its lowest level as traders prepare for a potentially significant interest-rate cut from the Fed on Wednesday. Treasury 10-year yields remained steady after a drop on Monday.

Money continued to flow into sectors of the market sensitive to the economy, even as bond traders remained undecided about whether policymakers would cut interest rates by a quarter or a half point on Wednesday.

According to data from Bloomberg, except for the central bank’s emergency rate cut in March 2020 at the onset of the pandemic, this is the greatest uncertainty in interest-rate swap markets for any scheduled Fed decision since 2007.

However, strategists from Morgan Stanley to Goldman Sachs Group Inc. and JPMorgan Chase & Co. stated that the size of the interest-rate reduction is less relevant to stocks than the health of the US economy.

In Asia, concern is growing about the strength of China’s economy as markets in Indonesia and Malaysia reopen after being closed on Monday. Disappointing economic data over the weekend is adding pressure on the authorities to increase fiscal and monetary stimulus if the nation is to reach this year’s growth target.

Investors will closely monitor the trading debut of Chinese appliance giant Midea Group Co. in Hong Kong as robust demand for the biggest public stock offering in three years revives hopes for the city’s struggling market.

Meanwhile, the yen remained stable after strengthening beyond 140 per dollar for the first time since July 2023 on Monday. The Japanese currency extended its rally from the weakest point in nearly 38 years in July. The Bank of Japan is expected to stay on hold on Friday after raising rates twice this year.

The Bloomberg “Magnificent Seven” gauge of mega caps slipped 0.7% on Monday, while the Russell 2000 of small firms added 0.3%. Microsoft Corporation announced a USD 60 billion stock-buyback program, matching its largest-ever repurchase authorisation, and raised its quarterly dividend by 10%. The shares rose less than 1% in extended trading.

In commodities, gold remained near a record high, as traders’ uncertainty about the Federal Reserve’s interest-rate decision is the highest since 2007. Oil climbed for a second session.

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