San Francisco Frontiers - Asian stocks drift as traders prepare for expected US rate cut

The reduction has been well baked into traders' plans following a string of comments from key decision-makers since last month and data indicating the labour market continues to deteriorate.

However, with the latest round of inflation figures suggesting there is plenty of work to do to get prices under control, and confidence among consumers softening, there are worries the central bank might not have room to keep cutting.

The latest, and delayed, reading on September personal consumption expenditure (PCE) -- the Fed's preferred gauge of inflation -- came in slightly above August, though the core reading was unchanged.

The data did little to move the needle on rate expectations but showed that it remains stubbornly above officials' target.

Economists at Bank of America said that 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 being cleared, the BoA team pointed out that there were several key releases between Wednesday's decision and the next meeting in January.

That includes three non-farm payrolls prints, two unemployment reports, two inflation releases and retail sales for October, November and maybe December.

"We look for two or three substantive changes in 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 uptick over the last three months," they wrote.

"The forward guidance language might also be tweaked to indicate that the bar for additional cuts has risen. This would be a nod to the hawks.

"Markets are looking for a hawkish cut, in the sense that they're pricing under eight basis points of cuts in January and less than a full 25 points in the first three meetings of 2026 (after which Jerome Powell's term as Chair ends)."

All three main indexes on Wall Street ended last week on a positive note, but Asia struggled to match.

Tokyo rose with Shanghai, Seoul and Taipei while Hong Kong, Sydney, Singapore, Mumbai and Bangkok were in the red.

There was little major reaction to data showing Chinese exports rose in November at a forecast-beating pace to push the country's trade surplus past $1 trillion for the first time.

The surge came despite a plunge in shipments to the United States last month, with below-par imports highlighting the battle Beijing faces in trying to kickstart consumer activity and economic growth.

Traders are also keeping a wary eye on China-Japan tensions following news that Tokyo summoned Beijing's ambassador after Chinese military aircraft locked radar onto Japanese jets.

Relations have chilled since Japan's Prime Minister Sanae Takaichi suggested last month that Japan would intervene militarily in any Chinese attack on Taiwan.

Tokyo said J-15 jets from China's Liaoning aircraft carrier on Saturday twice locked radar on Japanese aircraft in international waters near Okinawa.

China's navy said Tokyo's claim was "completely inconsistent with the facts" and told Japan to "immediately stop slandering and smearing".

- Key figures at around 0700 GMT -

Tokyo - Nikkei 225: UP 0.2 percent at 50,581.94 (close)

Hong Kong - Hang Seng Index: DOWN 1.1 percent at 25,799.52

Shanghai - Composite: UP 0.5 percent at 3,924.08 (close)

Dollar/yen: DOWN at 155.23 yen from 155.32 yen on Friday

Euro/dollar: UP at $1.1663 from $1.1642

Pound/dollar: UP at $1.3330 from $1.3329

Euro/pound: UP at 87.50 pence from 87.35 pence

West Texas Intermediate: UP 0.2 percent at $60.20 per barrel

Brent North Sea Crude: UP 0.2 percent at $63.88 per barrel

New York - Dow: UP 0.2 percent at 47,954.99 (close)

London - FTSE 100: DOWN 0.5 percent at 9,667.01 (close)

M.Hill--SFF