Markets Hold Breath as Fed Rate Decision Looms

Global markets are waiting with bated breath for the Federal Reserve's interest rate decision this week, with traders assigning a probability of over 90% to a rate hike. The decision is expected to have a significant impact on equities and bonds, with investors largely remaining on the sidelines until the announcement.

The Nikkei 225 Index closed up 0.7% at 63,923 points, while the Korea Composite Stock Price Index (KOSPI) rose 1.4% at 6,717.97 points. U.S. equity futures gained 0.2%, and European stocks are expected to open higher.

The recent sharp rally in oil prices has stalled, with Brent crude falling 0.7% after a U.S. industry inventory report showed an increase in crude stockpiles. The yield on the 10-year U.S. Treasury note edged back down to 4.99% from the nearly two-decade high of 5.04% touched on Tuesday.

Peter Dragicevich, Asia-Pacific currency strategist at Corpay Inc., stated that given the market has already priced in a significant degree of tightening expectations, it will be difficult for the Federal Reserve to exceed current market expectations and deliver stronger hawkish signals.