Asian markets anticipate cautious start amid U.S. Federal Reserve policy implications

© Reuters.

Asian stock markets are preparing for a cautious commencement to the week today, as investors evaluate the potential impact of the U.S. Federal Reserve's policy stance. Japanese futures remained steady on Sunday, while Australian futures and Hong Kong stock contracts experienced slight declines. In contrast, an index of U.S.-listed Chinese companies saw an increase, following the announcement that Washington and Beijing are setting up working groups to discuss economic and financial matters.

In early Monday trading in Asia, S&P 500 futures rose by 0.2%, recovering from Friday's equivalent fall that marked its poorest week since March. Nasdaq 100 futures also increased by 0.2%, buoyed by Apple Inc (NASDAQ:AAPL).'s latest product sales which contributed to the stability of the underlying index on Friday.

The upcoming week will see U.S. Treasuries once again under scrutiny due to scheduled public appearances by Federal Reserve officials. Investors are also awaiting key U.S. inflation data and assessing the potential implications of a possible U.S. government shutdown.

According to market analyst Fawad Razaqzada from City Index and Forex.com, traders remain wary about inflation and policy direction in light of the recent oil surge and the Fed's hint that interest rates will not decrease in the near future.

Two Federal Reserve officials suggested last week that at least one more rate hike could be forthcoming, with borrowing costs potentially needing to stay high for a longer period for inflation to return to its 2% target. Boston Fed President Susan Collins did not rule out further tightening, while Governor Michelle Bowman suggested that more than one increase might be necessary, reinforcing her status as one of the Federal Open Market Committee's most hawkish members.

San Francisco Fed Bank President Mary Daly stated last week that it is premature to claim victory over inflation, reaffirming the central bank's continued commitment to manage price pressures as smoothly as possible.

Bank of America Corp (NYSE:BAC)'s rate strategists predict that the yield on 10-year Treasuries could reach 4.75% before softer risk sentiment and tighter financial conditions drive it down by year-end.

In other market news, oil prices are approaching their annual high, while Bitcoin remained steady around $26,500.

The week ahead is packed with key events including speeches by Minneapolis Fed President Neel Kashkari and ECB's Francois Villeroy de Galhau on Monday. This will be followed by the release of U.S. new home sales data and Conference Board consumer confidence on Tuesday, with ECB's Philip Lane also scheduled to speak. Other highlights include China's industrial profits data and U.S. durable goods data on Wednesday, Eurozone economic and consumer confidence data on Thursday, and U.S. initial jobless claims and GDP data.

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