ASX gears up for more losses even after US market gains on rate hopes

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The Australian sharemarket is set to open lower amid lingering concerns about China’s economy, even as US shares gained overnight as traders geared up for the Federal Reserve’s interest-rate decision on Wednesday, which could set Wall Street’s direction into next year.

ASX futures were down 14 points, or 0.2 per cent, at 8244 as of 7.59am AEDT, setting the local sharemarket up for its potential sixth day of losses in a row. The S&P/ASX 200 shed 0.6 per cent on Monday after data showed retail sales growth in China unexpectedly weakened in November, adding to investors’ disappointment after Beijing last week failed to offer details on fiscal stimulus plans.

It was a different story on Wall Street, where the S&P 500 rose 0.4 per cent and the Nasdaq 100 gained 1.5 per cent to a new all-time high, with a widely expected quarter-point rate cut from the Fed seen as adding fresh support and extending stocks’ stellar run.

Wall Street has gained overnight. Credit: Bloomberg

Bitcoin also hit a fresh record and topped $US107,000 ($168,036), according to CoinDesk. It’s catapulted from roughly $US44,000 at the start of the year, riding a recent wave of enthusiasm that President-elect Donald Trump will create a system that’s more favourable to digital currencies.

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The US investors, the main event this week will arrive on Wednesday when the Fed will announce its last move on interest rates for the year. The widespread expectation is that it will cut its main rate for a third straight time, as it tries to boost America’s slowing job market after getting inflation down close to its target of 2 per cent.

The question is how much more it will cut rates next year, and Fed officials will release projections for where they see the federal funds rate ending in 2025, along with other economic indicators, once their meeting concludes. Fed Chair Jerome Powell will also answer questions in a press conference following the meeting.

For now, the general expectation among traders is that the Fed may cut two more times in 2025, according to data from CME Group. But that number has been shrinking following reports suggesting inflation may be tougher to get all the way down to 2 per cent from here. Besides last month’s slight acceleration in inflation, another worry is that Trump’s preferences for tariffs and other policies could lead to higher inflation down the line.

Expectations for a series of cuts to rates by the Fed have been one of the main reasons the S&P 500 has set an all-time high 57 times so far this year and is heading for one of its best years of the millennium. The US economy has held up better than many feared, continuing to grow even after the Fed hiked the federal funds rate to a two-decade high in hopes of grinding down on inflation, which topped 9 per cent two summers ago.

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