Asian markets saw a surge on Thursday following the Federal Reserve’s move to prevent a recession in the U.S. by implementing a larger-than-usual cut to interest rates. In Tokyo, the Nikkei 225 index rose by 2.5% to 37,284.43, while Hong Kong’s Hang Seng gained 1% to reach 17,840.93. The Shanghai Composite index climbed by 0.8% to 2,738.19, and Taiwan’s Taiex also saw a 1% increase. However, South Korea’s index experienced a slight decline of 0.3% to 2,566.65.
The Bank of Japan and the Bank of England are also set to hold monetary policy meetings this week, with no expected rate changes. The Fed’s rate cut was well-anticipated, resulting in relatively muted reactions from Wall Street. Thomas Mathews of Capital Economics mentioned that further rate cuts may not have a significant impact on the markets.
This rate cut by the Federal Reserve is the first in over four years, aiming to alleviate the slowing U.S. economy and boost investments’ prices. The move is expected to support the labor market and overall economy as inflation has eased significantly from its peak two years ago.
Fed Chair Jerome Powell emphasized the importance of supporting the labor market during a strong economy, stating that the Fed’s commitment is timely. Critics have raised concerns about the Fed keeping interest rates high for too long, but Powell defended the decision, emphasizing the importance of striking a balance between jobs and inflation.
Stock prices, gold, and bond prices have already rallied in anticipation of rate cuts. Treasury yields fluctuated after the Fed’s announcement, with the 10-year Treasury yield rising to 3.70% and the two-year yield increasing to 3.62%. On Wall Street, Intuitive Machines saw a 38.3% surge after securing a contract with NASA, while Tupperware Brands remained halted after filing for Chapter 11 bankruptcy protection.
In other news, U.S. benchmark crude oil prices declined slightly, with Brent crude also seeing a decrease. The dollar strengthened against the Japanese yen but slipped against the euro. Overall, the market reaction to the Fed’s rate cut indicates a shift in focus towards supporting the labor market and striking a balance between jobs and inflation.
