Asian stocks advance: Yen weakens, Asian stocks advance ahead of BOJ

Shares in Japan and South Korea rose, while Australian equities slipped. Contracts for US stocks inched higher after benchmarks slid on Tuesday. Investors have slashed holdings of US equities by the most on record while cash levels jumped, according to Bank of America Corp.’s latest survey.

The uncertainty over President Donald Trump’s economic policies has spurred fears of a recession, with traders seeking clarity from the Federal Reserve policy decision later Wednesday. Investors have also been hunting for opportunities elsewhere, with benchmarks in China and Japan rallying in recent weeks. A Bank of Japan announcement is due, with policymakers expected to keep the benchmark interest rate unchanged.

“Sticky inflation and higher inflation expectations raise the bar for Fed cuts,” said Lauren Goodwin at New York Life Investments. “The Fed is likely to need to see a stronger deterioration in financial conditions and the economic growth outlook before pre-emptively cutting with inflation figures so strong.”

Treasuries were stable after edging higher Tuesday following a solid $13 billion sale of 20-year bonds. The greenback drifted upward against most Group-of-10 peers, and the yen fell further ahead of the BOJ decision.

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In Asia, Chinese banks were set to slash rates on consumer loans to record lows as policymakers ramp up stimulus to stabilize growth. Beijing is seeking to ignite consumer spending and stoke local demand to help make the economy less reliant on trade and exports. Investors will also be monitoring market turmoil in Indonesia, where mass selloffs triggered circuit breakers and trading halts on Tuesday.Just about a month ago, US stocks were making new highs on expectations that Trump administration policies would stoke growth. Those assumptions may now be under threat if the economy slows and big bets on artificial intelligence don’t pay off. “Because investors’ favorite stocks have suffered so much, it’s likely impacting investor sentiment disproportionately,” said Bret Kenwell at eToro. “Historically, similar levels in sentiment have coincided with at least a short-term bottom in US stocks, although it’s not clear that we’ve seen a capitulatory type move that generally marks the bottom.”

In commodities, oil slipped as broader market weakness and concerns about a global glut of crude overshadowed escalating tensions in the Middle East. Meanwhile, gold rose to a record high above $3,030 an ounce, underscoring its haven appeal.

Dot Plot

The Fed is expected to hold interest rates steady and its quarterly dot plot should give investors more insight into the outlook for the economy. Traders will also be focused on Fed Chair Jerome Powell’s press conference and his juggling act between communicating the central bank’s current view of the economy and weighing the potential impact of Trump’s trade policy.

Following a rapid stock selloff, talks about a “Fed put” to rescue investors have risen. But anyone expecting some reassurance at the March meeting will be disappointed, according to Anna Wong at Bloomberg Economics.

Uncertainty over geopolitics and the Fed’s interest-rate decision overshadowed better-than-expected factory output data that eased concern of weakening manufacturing. Other data released Tuesday showed a rebound in US home construction.

Traders’ concerns showed as the S&P 500 fell 1.1% on Tuesday while the Nasdaq 100 slid 1.7%. Nvidia Corp. sank 3.4% despite laying out plans to expand its AI reign with robots and desktop systems, Tesla Inc. dropped 5.3% and Meta Platforms Inc. became the last of the Magnificent Seven stocks to lose its year-to-date gain.

Options traders are pricing in a 1.2% move in the S&P 500 in either direction on Wednesday — up from an average of 0.8% for Fed Days over the past year, according to data from Stuart Kaiser, Citigroup’s head of US equity trading strategy.

“Time will tell if the decision and meeting offer relief from the pain for the S&P 500,” according to Bespoke Investment Group strategists. “If there is one silver lining though, historically, Fed days when rates have been left unchanged have tended to see solid gains.”