As Fed Rate-Cut Bets Decline, Asian Stocks Slightly Drop – Asia Market Wrap

Asian markets fell as traders reduced their expectations on the Fed’s interest rate cut after US inflation data revealed that corporations are beginning to pass on some tariff-related expenses to customers.

The MSCI regional index fell 0.1%, but a barometer of Hong Kong technology shares surged 0.5% on expectations that some chip shipments to China will resume. Hong Kong’s broader market index was on track for its highest close since February 2022. Contracts for the S&P 500 and Nasdaq 100 fell 0.2%. Treasuries crept higher, with 30-year rates still around 5%. Gold climbed 0.4%, providing support for haven assets.

Traders have priced in decreased odds that the Fed will cut rates more than once this year, with the possibility of a move in September currently seen as slightly more than 50%. While policymakers would most likely need to keep interest rates stable for a while longer to properly temper inflation, they may need to switch to reducing if inflation and labour markets deteriorate, according to Fed’s Logan.

Asian pharmaceutical stocks fell after Trump said he was likely to impose tariffs on pharmaceuticals by the end of the month, as well as levies on semiconductors, implying that those import taxes could be combined with broad “reciprocal” rates set to go into effect on August 1st.