Asian shares are mixed ahead of Fed interest rate decision

Flaring Japan-China tensions also were weighing on sentiment, as traders remained cautious.

Japan and Australia urged calm on Sunday after Chinese military aircraft locked radar on Japanese fighter jets, weeks after a remark about Taiwan by Japanese Prime Minister Sanae Takaichi stirred tensions with Beijing.

Defense Minister Shinjiro Koizumi said Japan had formally protested the incident, calling it “an extremely regrettable” act and “a dangerous” one that “exceeded the scope necessary for safe aircraft operations.”

Tokyo's Nikkei 225 index slipped 0.2% to 50,581.94 after the government reported revised government data showing that Japan’s economy contracted at an annual pace of 2.3% in the July-September period, not the 1.8% annual rate earlier reported. Japanese exports suffered from the impact of U.S. President Donald Trump’s tariffs and public investments slipped.

Chinese markets were mixed, with Hong Kong's Hang Seng falling 0.9% to 25,841.21, while the Shanghai Composite index gained 0.6% to 3,926.47.

Chinese leaders convened a major annual economic policy planning conference, as the government reported that China's global exports rose 5.9% in November from a year earlier, surpassing $1 trillion so far this year. Exports to the U.S. sank 29% year-on-year, while shipments to other destinations helped offset that decline.

Elsewhere in Asia, South Korea's Kospi added 1.3% to 4,154.85, while Taiwan's benchmark jumped 1.2%.

In Australia, the S&P/ASX 200 shed 0.1% to 8,624.40.

On Friday, the S&P 500 added 0.2% and finished just shy of its record closing level set in October. It briefly topped that level during the day, before paring its gain and closing at 6,870.40.

The Dow Jones Industrial Average added 0.2% to 47,954.99, and the Nasdaq composite gained 0.3% to 23,578.13.

The modest moves capped a quiet week for Wall Street, offering a respite following weeks of sharp and scary swings.

Ulta Beauty helped lead the market and jumped 12.7% after the retailer reported stronger profit and revenue for the latest quarter than expected. Victoria’s Secret & Co. soared 18% after it delivered a milder loss for the latest quarter than analysts expected.

Warner Bros. Discovery rose 6.3% after Netflix said it would buy Warner Bros. for $72 billion in cash and stock following its pending split from Discovery Global. Netflix shares fell 2.9% and Paramount Skydance, which earlier had been seen as a front-runner to buy Warner Bros., sank 9.8%.

This week, attention will focus on what the Federal Reserve will do with interest rates, whether too many dollars are flowing into artificial-intelligence technology and if sharp drops for cryptocurrencies would bleed over into other markets.

After some back and forth, the widespread expectation among traders is now that the Fed will cut its main interest rate Wednesday in hopes of shoring up the slowing U.S. job market. If it does, that would be the third cut of the year.

Lower interest rates boost prices for investments and help the economy. The downside is that they can worsen inflation, which is stubbornly remaining above the Fed’s 2% target.

Economic reports released on Friday did little to change expectations for a coming cut. One said that an underlying measure of inflation that the Fed prefers to use was at 2.8% in September, exactly as economists expected.

A separate report said U.S. consumers appear to be downgrading their expectations for inflation coming in the near future. They’re now forecasting 4.1% inflation for the year ahead, down from their forecast of 4.5% last month, according to the University of Michigan.

That’s the lowest such forecast since January, which is important because heightened expectations for inflation can create a vicious cycle that only worsens inflation.

In other dealings early Monday, U.S. benchmark crude oil added 14 cents to $60.22 per barrel. Brent crude, the international standard, gained 11 cents, to $63.86 per barrel.

The dollar slipped to 155.26 Japanese yen from 155.30 yen late Friday. The euro rose to $1.1659 from $1.1639.