The calm before the storm: Eyes on FOMC interest rate decision this week

US equities finished last week by shaping fresh all-time highs. $E-mini S&P 500 Futures (DEC5) (ESmain.US)$ and $E-mini NASDAQ 100 Futures (DEC5) (NQmain.US)$ added 1.52% and 1.81% respectively. This was mostly supported by broad optimism around artificial intelligence and growing market conviction for monetary easing after data pointed to a cooling labor market and subdued inflation. The markets are now pricing in a certain 25 basis point rate cut at the upcoming FOMC meeting, while the spotlight remains on whether Stephen Miran will be confirmed as Fed governor before the decision. Retail sales and FOMC interest rate decision this week will be key market events for investors to look out for.

In Asia, Japanese shares soared to fresh records tracking US equity indices. The $OSE Nikkei 225 Futures (MAR6) (NK225main.JP)$ rallied by 3.27% last week with $TOPIX Futures (MAR6) (TOPIXmain.JP)$ adding 0.84%. Local investors continue to make sense of a mixed local picture: political uncertainty mounted after Prime Minister Shigeru Ishiba announced his resignation amidst ruling party rifts and post-election fallout. Standouts included $Tokyo Electron (8035.JP)$ (up 5.5%), $SoftBank Group (9984.JP)$(+1.8%), and $Advantest (6857.JP)$ (+1.8%) as tech and semiconductor demand held strong, propelling the market higher. Hong Kong’s $HSI Futures (DEC5) (HSImain.HK)$ extended its winning streak, reaching its highest since August 2021, finishing the week up 3.89%. Risk on sentiment was bolstered given the Chinese government's targeted liquidity support, including aid to local governments tackling unpaid bills. Tech shares soared on AI optimism as $BABA-W (09988.HK)$ and $BIDU-SW (09888.HK)$ surged after unveiling domestically engineered chips, dramatically reducing their reliance on $NVIDIA (NVDA.US)$. Other big movers feature $CHINAHONGQIAO (01378.HK)$(+6.1%), $AKESO (09926.HK)$(+6.0%), and $ZHAOJIN MINING (01818.HK)$(+4.3%), with property and consumer shares joining the rally. Singapore’s $FTSE Singapore Straits Time Index (.STI.SG)$ also added 0.86% last week despite the end of week selloff on Friday. Local sentiment wavered as investors booked profits after a multi-week run, even as regional peers rallied on US easing hopes. $SGX (S68.SG)$ is set to launch a new index tracking large and liquid companies outside the STI, aiming to broaden market visibility, alongside ongoing government initiatives (including a S$5 billion boost to asset managers focusing on Singapore equities).

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