Investors monitor the U.S. Fed’s policy decision due later this week amid easing cycle hopes.
Global stock markets began the week hesitantly on Monday with investors closely monitoring the U.S. Federal Reserve’s policy decision due later this week. A widespread expectation that the Fed will initiate a new easing cycle, likely with a 25 basis-point rate cut, has created a cautious trading environment across Asian, European, and U.S. markets. Market participants are weighing mixed economic signals, ongoing geopolitical tensions, and fresh corporate earnings, leading to somewhat tentative moves in equities worldwide.
Mixed signals from Asia
Asian stock markets opened with a mixed but overall cautious tone as investors digested the prospects of Fed policy easing against a backdrop of ongoing U.S.-China trade negotiations held in Madrid. Key U.S. Treasury and trade officials met with Chinese counterparts to discuss tariffs, technology restrictions, and the looming TikTok divestment deadline, all adding a complex geopolitical overlay to market dynamics. In this context, the Nikkei 225 (N225) rose by 395.62 points, or 0.89 percent, to reach a total of 44,768.12. Meanwhile, Hong Kong’s Hang Seng Index gained 0.29 percent to 26,465.00, buoyed by hopes for stimulus and easing tensions. However, the Shanghai Composite Index edged slightly lower by 0.11 percent to 3,866.25, reflecting investor profit-taking after recent gains amid concerns over the robustness of China’s domestic economy. The Shenzhen Component rose 0.89 percent to 13,039.63, showing pockets of strength in select sectors.
South Korea’s Kospi inched up 0.08 percent, reaching 3,398.28 and moving near record territory, supported by favorable domestic policy announcements such as easing capital gains tax proposals. Meanwhile, Australia’s S&P/ASX 200 index saw a modest pullback of 0.26 percent to 8,842, as some investors took profits following strong recent rallies. It is noteworthy that Japan’s markets were closed for a public holiday, limiting early Asian trading activity. This mixed performance underscores the cautious optimism prevailing in Asia as markets await clarity from the upcoming U.S. Federal Reserve meeting and evolving trade talks.
European indices under pressure
In Europe, market indices showed moderate weakness at the open amid concerns over economic growth and geopolitical risks. The U.K.’s FTSE 100 slipped 0.15 percent to 9,283, while Germany’s DAX and France’s CAC 40 both experienced minor declines reflecting investor caution. The Euro weakened slightly against the dollar, pressured by France’s downgrade to its sovereign credit rating by Fitch, which weighed on sentiment. Despite these losses, European markets have maintained respectable gains year to date, with many investors awaiting upcoming central bank decisions, including the Bank of England’s meeting later this week. The broader macroeconomic picture remains clouded by mixed corporate earnings and persistent inflationary pressures.
Slight dip in the S&P 500
Across the Atlantic, U.S. stock markets remained near record levels on Monday following last week’s rally. The S&P 500 dipped slightly by 0.05 percent to 6,591.66, buoyed by optimism surrounding potential Fed rate cuts that could stimulate economic growth. The Dow Jones Industrial Average fell by 0.59 percent to 45,834.22, indicating continued demand for blue-chip stocks. Meanwhile, the Nasdaq Composite, driven by robust performance in the tech sector, increased by 0.44 percent to 22,141.10. Investors are currently processing mixed earnings reports alongside moderating labor market data, which have contributed to the market’s upward momentum in recent months. All eyes are now on the Federal Reserve’s policy statement scheduled for Wednesday, along with the press conference by Chair Jerome Powell, where the tone may significantly influence market sentiment.
Emerging markets in the Middle East also showed varied movements with Saudi Arabia’s Tadawul All Share Index trading dipping 0.18 percent at 10,433.98, reflecting recent stability amid volatile global conditions. The broader GCC markets are awaiting further clarity on regional economic policies and global trade developments that could impact foreign investment flows. The Dubai Financial Market Index was steady at 3,508.74, reflecting ongoing interest in the real estate and financial sectors.
Last week, regional markets saw mixed movements amid rising oil prices and geopolitical risks. Kuwait led gains (+2.5 percent), Dubai advanced (+0.7 percent) after a strong rally, and Bahrain extended gains (+0.5 percent). Conversely, Qatar slightly declined (-0.1 percent) due to banking losses, Abu Dhabi dropped (-0.2 percent) pressured by ADCB’s discounted rights issue, Oman ended its 10-week rally (-0.8 percent), and Saudi Arabia fell near a two-year low (-1.9 percent).
Central bank policies shape sentiment
The week ahead focuses on GCC banking sector volatility amid anticipated U.S. Fed easing, which influences GCC central banks due to currency pegs. Geopolitical tensions remain high, according to a new report from Iridium Advisors.
Global central bank policies dominate investor sentiment: 93.4 percent expect a 25 basis-point Fed rate cut; the Bank of Canada is likely to follow suit. The Bank of Japan plans to hold rates amid weakening exports, and the Bank of England is expected to pause for reassessment.
Iridium’s GCC Sentiment Index hit a decade-high 42.7 in Q2 2025, driven by improved analyst-management dialogue and 69 percent of companies beating forecasts. While sentiment improved in Qatar, it weakened in Saudi Arabia. Future credibility depends on transparent management addressing inflation, geopolitics, and trade.
GEM funds increased Saudi Arabia exposure to 59 percent, focusing on financials and communications, while the UAE remains the most overweight GCC market at 40.5 percent, driven by real estate, financials, and industrial sectors. ADIB, Al Rajhi, and SNB gained fund weight; Emaar Development, Mobily, and SAB lost ground. GEM funds now hold 201 GCC firms, adding 14 names since H1 2025, Iridium’s weekly report showed.
Key market stats: Saudi Arabia’s index closed near two-year lows, with a P/E of 18.0x and market cap of $2.33 trillion. Dubai and Abu Dhabi indexes declined, while Kuwait and Oman led yearly gains among GCC markets. Brent oil rose 2.27 percent weekly but remains down 10.25 percent year-to-date; gold gained 1.57 percent weekly, up 38.81 percent YTD.
Upcoming macro events include the U.S. Fed decision on September 17, U.K. August inflation and retail sales data, Japan’s BoJ interest rate decision, and Eurozone ECB President Lagarde’s speech.