: Stocks in Asia are set to diverge after Wall Street edged lower, as traders brace for the Federal Reserve’s final policy decision of the year.

Futures point to a gain in Hong Kong, a decline in Tokyo and little change in Sydney after the S&P 500 and the Nasdaq 100 both slid 0.4% and the Dow Jones Industrial Average posted its longest losing streak since 1978. American depositary receipts of Honda Motor Corp. and Nissan Motor Co. rose after Japan’s Nikkei said the companies are preparing to start negotiations on a merger.

In the US, retail sales increased at a firm pace in November, highlighting consumer resilience, although industrial production unexpectedly declined for a third month. Traders are now turning to the Fed decision, with a quarter-point cut widely expected, but less clarity over what happens in the following months as the prospect of inflationary import tariffs proposed by the incoming administration may give Fed officials pause about the pace of further moves.

“Consumption at the start of the holiday season was upbeat, suggesting the US economy is on track to finish 2024 on a strong note,” ANZ Group Holdings Ltd. analysts Brian Martin and Daniel Hynes said in a note. “Resilience in the US economy supports our view that the FOMC will pivot to a slower and shallower easing cycle in 2025.”

Bank of America Corp. sees the Fed lowering interest rates to the 3.75% level — or three more cuts from where they are currently, Chief Executive Officer Brian Moynihan said on Bloomberg Television.

“They need to bring it down a little bit, they just have to be more careful because the economy is stronger than we thought three months ago, six months ago but still has potential weaknesses” he said. “We haven’t even talked about what is going on outside the United States that could affect it — not tariffs but wars.”

On the other hand, Chris Larkin, managing director, trading and investing, at E*Trade from Morgan Stanley, says more strong economic data like retail sales could bolster the case for the Fed to pause in January.

In either case, what happens to stocks and bonds will be determined by what the Fed says about cuts in 2025 instead of the central bank’s decision Wednesday, wrote Tom Essaye, president and founder of Sevens Report and a former Merrill Lynch trader. 

Oil fell, leading commodities lower, as disappointing data out of China earlier in the week continued to weigh. The yield on 10-year Treasuries was little changed at 4.4%. 

Bloomberg’s dollar gauge fluctuated for most of the session, while the yen snapped a six-day losing streak, after its rapid decline in the past week had strategists warning that further weakness may trigger verbal intervention from authorities. The Canadian dollar slid to its lowest level since March 2020.

  - Bloomberg