Stocks Hold Near Record Highs Ahead of Fed Meeting

Stocks began the week trading just shy of record highs as investors turned their attention to the Federal Reserve’s upcoming interest rate decision.

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A global equities benchmark held firm after closing at its highest level on Friday, while the MSCI Asia Pacific Index briefly touched a fresh milestone before easing back. Chinese markets gained 0.4%, brushing aside disappointing factory and consumer data. With Japan closed for a public holiday, U.S. Treasury cash trading in Asia was on pause.

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The big question this week is whether Fed policymakers will temper expectations for multiple rate cuts stretching into next year. Wednesday’s announcement is expected to set the tone for global markets, though it won’t be the only central bank decision in play. Investors will also be watching updates from the Bank of Canada, the Bank of England, and the Bank of Japan, making this one of the most consequential weeks for monetary policy in months.

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“The week is going to be all about central bank decisions,” said Kyle Rodda, senior market analyst at Capital.com in Melbourne. “The Fed is almost certain to cut rates by 25 basis points. What’s less clear is how far they’re willing to go, given that traders are already betting on cuts at each of the remaining three meetings this year.”

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In China, economic momentum continued to falter, marking the second straight month of weaker-than-expected activity driven by a sharp decline in investment.

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“China’s August data hardly inspire confidence exports remain under tariff strain while the property slump is still dragging on demand,” noted Charu Chanana, chief investment strategist at Saxo Markets in Singapore. “Still, investors appear unfazed, with households deploying excess cash into stocks, while AI enthusiasm continues to fuel gains in semiconductor shares.”

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Both industrial production and consumer spending logged their softest readings of the year, highlighting the depth of the slowdown. HSBC’s Jing Liu, Greater China Chief Economist, suggested Beijing may be compelled to roll out additional stimulus to cushion the downturn.

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On the geopolitical side, U.S. and Chinese officials held talks on trade, economic ties, and the status of ByteDance’s TikTok, which faces a deadline this week to secure a deal allowing it to continue U.S. operations. Discussions are also expected to pave the way for a potential meeting between President Donald Trump and Chinese President Xi Jinping as early as October.

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Meanwhile, Asia’s primary bond market kicked off the week with notable momentum, with roughly a dozen issuers either selling debt in multiple currencies or mandating banks for upcoming deals. This wave of activity adds to a global surge in issuance this month as companies rush to take advantage of tight spreads an indicator of solid credit conditions.

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Still, the centerpiece remains the Fed’s decision. While markets broadly anticipate a quarter-point cut on Wednesday, some see a slim chance of a more aggressive half-point move given the rapid slowdown in U.S. job growth.

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“The Fed is likely to deliver a dovish cut, with at least one policymaker supporting a 50 basis point reduction,” said Elias Haddad, senior market strategist at Brown Brothers Harriman. “Fresh forecasts may signal a sharper easing trajectory aimed at protecting a weakening labor market. Such a stance could weigh on the U.S. dollar and bolster risk assets.”

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Former President Trump also weighed in, predicting a “big cut” from the Fed ahead of what will be its first policy easing in nine months.

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Elsewhere in Europe, Fitch Ratings downgraded France’s credit rating from AA- to A+ late Friday. That places the country below the U.K. and on par with Belgium, underscoring how repeated government instability has left France locked in a prolonged struggle to rein in ballooning debt levels.

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French 10-year government bonds now yield among the highest in the euro area, comparable to those of Lithuania, Slovakia, and Italy. The spread over German bonds has nearly doubled since President Emmanuel Macron called elections last year, reflecting waning investor demand.

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