(Bloomberg) — Asian stocks rose together with US equity futures after the Federal Reserve cut rates of interest by half a percentage point and signaled further easing within the months ahead.
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Japanese equities rallied in early trading, helped along by fresh weakness within the yen against the dollar. US stock futures advanced after the S&P 500 initially touched a record before closing 0.3% lower, while the Nasdaq fell 0.5%.
“Lower US rates of interest could boost risk appetite for Asian stocks, driving capital inflows into emerging markets as investors seek higher returns,” said Manish Bhargava, chief executive officer at Straits Investment Management. “The initial phase of the Fed’s normalization cycle has been more assertive than expected, because the central bank recalibrated its policy focus to handle labor market conditions.”
The Fed’s first cut in greater than 4 years was accompanied by projections indicating a narrow majority favored an extra 50 basis points of cuts across the remaining two policy meetings this yr. Markets were pricing in a more aggressive 70 basis points of reductions. Fed Chair Jerome Powell cautioned against assuming big rate cuts would proceed.
An index of dollar strength pared its gains from the previous session early on Thursday, while the yen weakened to trade at around 142 per greenback. Treasury 10-year yields nudged higher, with their Australian and Recent Zealand counterparts tracking the move.
Within the US, equities, especially those of economically sensitive firms, briefly surged Wednesday, driving the S&P 500 up as much as 1%. From stocks to Treasuries, corporate bonds to commodities, every major asset was down Wednesday. While the size of the declines were minor, a concerted pullback like that hadn’t followed a Fed policy decision since June 2021.
Gold retreated from a record high while oil edged lower as signs of weak demand outweighed rising tensions within the Middle East.
In Asia, the Hong Kong Monetary Authority cut its base rate of interest for the primary time since 2020 following the Fed’s cut, while Recent Zealand’s economy shrank within the second quarter. Data set for release within the region includes unemployment for Australia and Hong Kong, trade figures for Malaysia and an rate of interest decision in Taiwan.
Elsewhere, the Bank of England is prone to refrain for cutting rates for a second consecutive meeting.
Treasuries, that are set for a fifth-straight month of gains in September, slipped after the Fed’s decision and Powell’s remarks. Officials’ updated quarterly forecasts showed the median projections were for the funds rate to fall by yr’s end to 4.375% — representing an additional half-point of total reductions this yr. By the top of 2025 and 2026, the median forecasts are for 3.375% and a couple of.875%, respectively.
“It now will likely be a battle between market expectations and the Fed, with employment data — not inflation data — determining which side is true,” said Jack McIntyre at Brandywine Global. “Now, everyone seems to be back to data dependency.”
Key events this week:
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UK rate decision, Thursday
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US Conf. Board leading index, initial jobless claims, existing home sales, Thursday
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FedEx earnings, Thursday
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Japan rate decision, Friday
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Eurozone consumer confidence, Friday
A few of the foremost moves in markets:
Stocks
Currencies
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The Bloomberg Dollar Spot Index was little modified
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The euro was little modified at $1.1111
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The Japanese yen fell 0.3% to 142.71 per dollar
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The offshore yuan was little modified at 7.0956 per dollar
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The Australian dollar fell 0.1% to $0.6757
Cryptocurrencies
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Bitcoin rose 1.7% to $61,246.78
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Ether rose 1.3% to $2,354.98
Bonds
Commodities
This story was produced with the help of Bloomberg Automation.
–With assistance from Winnie Hsu and Yasutaka Tamura.
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