Asian Markets React to Wall Street Rally
(Bloomberg) — Asian equities experienced gains following a surge in Wall Street shares after the Federal Reserve indicated potential interest rate cuts later this year, attributing any inflation spikes from tariffs as temporary.
Regional Stock Performance
Stocks in Australia and South Korea saw increases, buoyed by US futures, as the S&P 500 rose by 1.1% and the Nasdaq 100 climbed 1.3%. However, Chinese shares dipped in early trading after US-listed Chinese stocks experienced a downturn on Wednesday, suggesting a possible slowdown in their performance compared to US equities. Trading was halted in Japanese markets due to a public holiday, leading to no transaction activity for cash Treasuries in Asia.
Employment Data Impact on Australian Dollar
The Australian dollar weakened following employment data revealing a job loss of 52,800, contrary to the anticipated rise of 30,000 jobs. Meanwhile, Bloomberg’s index for the US dollar retraced gains from the previous session, and Treasury futures in Asia rose as gains from Wednesday continued following the Fed’s announcement.
Fed’s Interest Rate Decision
As expected, the Federal Reserve maintained its interest rates, with Chair Jerome Powell providing a cautious assessment of how President Donald Trump’s actions may influence the economy. Powell emphasized that inflationary pressures from tariffs are likely to be short-lived. This bullish stock market reaction marked the largest gain on a Fed announcement day since July, following a challenging four-week period that had seen the S&P 500 enter correction territory.
Market Reactions
“The market will interpret this as dovish, indicating that the Fed is not overly worried about the economy or inflation. This is uplifting for both stocks and bonds,” noted Christian Hoffmann from Thornburg Investment Management. Despite the Fed’s alterations to its forecasts, which might appear bearish for equities—such as lower growth expectations for 2025 and upward inflation estimates—US stocks rallied.
Miscellaneous Market Developments
In Asia, Chinese banks held their prime lending rates steady for another month. Upcoming economic data includes Hong Kong’s inflation figures and a policy decision from Taiwan. The Bank of England is also expected to maintain its interest rates, while the Swiss National Bank is projected to cut rates by 25 basis points.
Insights on Bond and Commodity Markets
Oil prices rose slightly after Wednesday’s gains, following a US government report that alleviated concerns regarding immediate demand destruction. Gold also increased after reaching a new high as the Fed signaled slower growth and rising inflation forecasts.
This update was produced with the assistance of Bloomberg Automation.
