Markets awaited the Federal Reserve decision, leading to a slight rise in global stocks and bonds. South Korean stocks closed up 1.4%, while oil price gains stalled.

Stocks and bonds rose modestly, but investors remained largely on the sidelines awaiting the Federal Reserve's interest rate decision this week. The market currently anticipates the Fed will announce its first rate hike since 2023. Meanwhile, the recent strong rally in oil prices stalled.

The Nikkei 225 index closed up 0.7% at 63,923 points. The Topix index closed up 0.6% at 4,061.72 points. The Seoul Composite Index closed up 1.4% at 6,717.97 points. U.S. stock futures rose 0.2%, and European stocks were also expected to rise in early trading. Interest rate swap market data showed that traders were betting on a greater than 90% probability of a Federal Reserve rate hike this time.

The pause in oil price gains has provided some breathing room for the market. Brent crude, which had surged about 20% this month driven by supply disruptions, fell 0.7% on Wednesday after a U.S. industry inventory report showed rising crude oil inventories, suggesting the rally was overheated. The 10-year U.S. Treasury yield also edged down to 4.99% from a near 20-year high of 5.04% reached on Tuesday.

This interest rate decision is highly anticipated. Last week's higher-than-expected core inflation data, coupled with market concerns about the government's fiscal budget, has further strengthened expectations that Federal Reserve Chairman Warsh will tighten monetary policy. Once the rate hike is implemented, it will have a combined effect with persistently high energy prices, pushing up inflation while also increasing bond yields and financing costs, putting additional pressure on the stock market.

The Nikkei 225 index closed up 0.7% at 63,923 points. The Topix index closed up 0.6% at 4,061.72 points. The KOSPI index closed up 1.4% at 6,717.97 points.S&P 500 futures rose 0.2%.The US dollar spot index remained largely unchanged.The euro remained unchanged at $1.1544.The yen fell 0.1% to $155.33.The yield on the 10-year U.S. Treasury note fell 1 basis point to 4.99%.The yield on Japan's 10-year government bonds fell 4 basis points to 2.995%.West Texas Intermediate crude fell 1.1% to $104.67 a barrel.Spot gold rose 0.7% to $4,321.01 per ounce.

US Treasury yields are near 20-year highs, with interest rate hike expectations dominating market pricing.

The yield on 10-year U.S. Treasury bonds hit a high of 5.04% on Tuesday, its peak since 2007, before falling slightly to 4.99% during Asian trading hours. Australian, Japanese, and New Zealand government bonds strengthened slightly, while European bond futures also rebounded.

This round of pressure on the bond market stems primarily from two combined forces: Brent crude oil has risen by about 20% this month, complicating the inflation outlook; at the same time, market bets on a Federal Reserve rate hike continue to intensify, driving bond sell-offs.

Peter Dragicevich, Asia-Pacific currency strategist at Corpay Inc., said, "Given that the market has already priced in a considerable amount of tightening expectations, and given that new Chairman Warsh himself does not favor 'forward guidance,' we believe the Fed is unlikely to exceed current market expectations and release a stronger hawkish signal." He also noted, "The market may experience brief volatility after the Fed's announcement, and there is a risk that the dollar may weaken afterward."

Federal Reserve officials have kept the benchmark interest rate in the range of 3.5% to 3.75% since last December, when most policymakers believed that the decline in inflation was being hampered by temporary factors.

Oil price gains stalled as supply-driven prices showed signs of overheating.

Brent crude fell 0.7% on Wednesday after a roughly 20% gain this month, driven by supply disruptions, raised concerns that the rally was overextended, while a U.S. industry report also showed an increase in crude oil inventories.

High oil prices are one of the core variables driving the current inflationary pressures. The continued rise in energy prices not only directly pushes up overall inflation but also indirectly increases pressure on the stock market by raising bond yields, thus making the Federal Reserve's policy decisions more challenging.

Bloomberg strategist Mark Cranfield noted, "Beneath the seemingly calm surface of Asian markets lies a packed schedule of risk events for the remainder of the week. Macro traders generally believe yields and oil prices will remain high, but regardless of the decisions made by the FOMC, the Bank of England, or the Bank of Japan, stocks are unlikely to experience a significant downturn."

With multiple central banks' decision-making windows converging, the market is focusing on policy guidance.

Following the Federal Reserve this week, the policy decisions of the Bank of England and the Bank of Japan will be announced one after another. The combined statements of the three major central banks may reshape the global monetary policy landscape in the second half of 2026.

Ken Wong, an Asia equity portfolio specialist at Eastspring Investment, said in a Bloomberg TV interview, "Listening to Warsh's statement is crucial, as it will clarify the expected path and direction for the market in the remaining months of 2026."

Analysts point out that if the Federal Reserve chooses to hold rates steady, or fails to provide clear follow-up guidance while raising rates, investors may demand higher long-term yields to hedge against inflation risks, while short-term yields will more closely follow changes in the policy path.

In other markets, gold rebounded to around $4,330 an ounce after falling for the previous two days; the Bloomberg Dollar Index saw limited movement; and Bitcoin was pressured after the U.S. Senate rejected a major cryptocurrency market structure bill, trading around $75,800.

Harvey Schwartz, CEO of Carlisle Group, said at the 2026 Global Investors Conference that the U.S. economy is performing "quite robustly" overall despite uncertainty and inflationary pressures, and believes that the Federal Reserve is currently in a phase of continuous data monitoring.

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