Sept 18 (Reuters) - A look at the day ahead in Asian

markets.

Investors in Asia will be forgiven for any reluctance to take on

much risk on Wednesday ahead of the Federal Reserve's interest

rate decision later in the day, although rising expectations of

a 50 basis point cut should provide some support to markets.

As Asia's first opportunity to react to the Fed is Thursday,

local events may move markets more on Wednesday. They include

the Indonesian central bank's rate decision, Japanese machinery

orders and trade data, and public comments from the Philippine

central bank governor and Reserve Bank of Australia assistant

governor Brad Jones.

The backdrop to the day's trading, however, is the Fed.

While rate futures market pricing suggests the Fed will begin

its policy easing cycle with a half percentage point move, there

are mounting reasons to believe a less market-friendly quarter

point cut is more appropriate.

Indeed, some might say the Fed doesn't need to be loosening

policy at all right now.

The S&P 500 and Dow on Tuesday rose to new all-time highs, after

official figures earlier in the day showed U.S. retail sales in

August were a lot stronger than expected. The upside surprise

lifted the Atlanta Fed's GDPNow model estimate of real GDP

growth in the third quarter to a new high of 3.0%.

This suggests the U.S. economy is doing just fine. On top of

that, U.S. financial conditions now are the loosest since April

2022, according to Goldman Sachs, or November 2021, according to

the Chicago Fed.

Fed figures published last week also showed U.S. household

net worth rose to another record high in the second quarter,

while household debt as a share of GDP fell to its lowest in 23

years.

Again, while the labor market is clearly softening there is

little sign that the U.S. consumer - and therefore, growth at

large - is in immediate peril.

In that context, the size and pace of rate cuts implied in

the rate futures curve is extremely aggressive - nearly 120 bps

over the three meetings left this year, and 245 bps in total by

the end of next year.

Could markets be setting themselves up for a fall? If

signals from Chair Powell's press conference or the Fed's new

economic projections suggest these lofty expectations might not

be met, stocks, bonds and non-dollar currencies may retrace some

of their recent gains.

The yen certainly recoiled on Tuesday, slumping 1% against the

dollar for its worst day in a month.

If the U.S. economy appears to be humming along nicely, signals

from elsewhere are less encouraging - German investor sentiment

and Canadian inflation figures on Tuesday were soft, and the

data from China at the weekend was alarmingly weak.

Over to you, Jay Powell.

Here are key developments that could provide more direction

to Asian markets on Wednesday:

- Indonesia central bank decision

- Japan machinery orders (July)

- Japan trade (August)