Japanese and Australian stock markets fall as Fed meeting approaches

Investing.com – Japanese and Australian shares fell on Wednesday, leading Asian shares lower, as worries about longer-term higher U.S. interest rates grew ahead of a Federal Reserve meeting later in the day.

Most other markets in the region were closed for the Labor Day holiday, which also kept overall trading volumes largely subdued.

Risk appetite was decidedly negative after Wall Street fell sharply overnight as signs of sticky U.S. inflation grew. U.S. stock index futures fell in Asian trading.

Japanese stocks fall on tech losses, yen volatility

Japanese stocks and indexes both fell 0.7%, with heavyweight technology stocks tracking losses among U.S. peers overnight.

Volatility in the stock market has also made investors wary of the Japanese market. The currency rebounded sharply from 34-year lows on Monday in what could be seen as government intervention.

A stronger yen has weakened the profits of Japanese companies, which rely mostly on exports.

But the yen weakened on Tuesday, returning to lows hit in April. That makes traders nervous about any further possible government intervention.

Purchasing managers' index data also showed Japan shrank slightly more than expected in April.

The Nikkei was Asia's worst-performing index through April as uncertainty over Japan's economy and the Bank of Japan led traders to book profits after the index surged to a record high in March.

Australian shares fall, RBA in focus

Australian shares were broadly lower, down 1.2%. Sentiment in Australian markets has also been capped by growing bets that the Reserve Bank of Australia may raise interest rates further amid high inflation.

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Rabobank analysts said they expected the Reserve Bank of Australia to raise interest rates twice more after higher-than-expected inflation in the first quarter.

The Reserve Bank of Australia is and is expected to keep interest rates on hold, at least for now. But the bank is likely to step up its hawkish message.

Rate anxiety grows as Fed waits

Broader markets were focused directly on late Wednesday, when the central bank was widely expected to keep interest rates steady.

But Fed Chairman Jerome Powell is likely to take a tougher stance, especially after a string of higher-than-expected inflation data in recent months.

The bank is currently expected to only start cutting interest rates in September, if at all this year. This situation bodes poorly for risk-driven assets such as stocks.

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