Asian Stocks Retreat as Rate Uncertainty Weighs on Sentiment

Most Asian equity markets slipped on Wednesday, following the negative lead from Wall Street as investors grappled with renewed uncertainty over the U.S. Federal Reserve’s interest rate trajectory. Technology shares, which had fueled recent gains, saw fresh selling pressure.

Wall Street’s Pullback Echoes in Asia

The cautious tone came after Fed Chair Jerome Powell warned of rising economic risks, dampening optimism over the central bank’s path of rate cuts. S&P 500 Futures traded flat in Asian hours, reflecting hesitation ahead of a heavy slate of U.S. economic releases later this week.

Japan’s Nikkei Dips on Weak PMI Data

In Japan, the Nikkei 225 and TOPIX fell modestly as trading resumed following Tuesday’s holiday. Data showed manufacturing PMI contracted more than expected in September, while services sector growth slowed, pushing overall business activity to its weakest pace in four months.

Persistent struggles in manufacturing, particularly in automobiles and steel, underscored the strain from U.S. tariffs. However, Japanese equities remain near record highs, supported by expectations that political uncertainty will delay any further rate hikes from the Bank of Japan.

Australia’s ASX 200 Slumps on Hot Inflation

The ASX 200 was among the weakest performers, tumbling 1% after August CPI rose 3% year-on-year, exceeding expectations of 2.9%. Core inflation also stayed well above the Reserve Bank of Australia’s 2–3% target, signaling sticky price pressures.

This reading complicates prospects for further RBA rate cuts, especially after the central bank already trimmed rates by 75 basis points in 2025. Markets interpreted the data as reducing the urgency for additional monetary easing.

China Provides Some Relief

In contrast, Chinese stocks bucked the trend, eking out mild gains on hopes of further stimulus from Beijing. Tech names also recovered after recent declines, helping offset broader regional weakness.