Asian shares were trading predominantly lower on Wednesday following a mixed finish on Wall Street. Investors were keeping a close eye on the U.S. presidential debate between Vice President Kamala Harris and former President Donald Trump to gauge any potential market impact.

The U.S. dollar has historically gained strength against other currencies when expectations of a Trump reelection rise, a phenomenon known as the “Trump trade.” This trend is partly influenced by Trump’s advocacy for tariffs.

In Japan, the Nikkei 225 index dropped 0.8% to 35,867.33, while Australia’s S&P/ASX 200 slipped 0.3% to 7,989.90. South Korea’s Kospi also fell by 0.2% to 2,517.44 after data revealed a decrease in the country’s unemployment rate to 2.4% in August from 2.5% in July.

Meanwhile, Hong Kong’s Hang Seng index decreased by 1.5% to 16,984.02, and the Shanghai Composite index dipped by 0.8% to 2,719.73. On Wall Street, the S&P 500 rose by 0.4%, nearing its record high set in July.

Tech stocks contributed to the market gains, despite concerns about the slowing U.S. economy and potential interest rate cuts. The Dow Jones Industrial Average declined by 0.2%, while the Nasdaq composite increased by 0.8%.

In the bond market, Treasury yields witnessed a slight decrease, with the 10-year Treasury yield falling to 3.64%. Investors are closely monitoring the upcoming Federal Reserve meeting next week, expecting a rate cut to support the economy.

Expectations of cuts to U.S. interest rates have led to volatility in both stock and bond markets. The focus is now on how much the Fed will reduce the federal funds rate, which is currently at a two-decade high.

Market analysts are awaiting this week’s reports on U.S. inflation, which could influence the extent of future Fed rate cuts. Economists predict a slowdown in the inflation rate to 2.6% in August compared to 2.9% in July.

In energy trading, benchmark U.S. crude oil prices rose by 46 cents to $66.21 a barrel. Brent crude, the international standard, also increased by 43 cents to $69.62 a barrel, near its lowest price since 2021.