Asian equities were poised for limited movement following declines on Wall Street, where the Federal Reserve implemented its first interest rate cut in over four years. Equity futures for Japan increased slightly, while those for Australia dipped, both within a range of less than 1%. The S&P 500 initially surged to an all-time high but ended 0.3% lower, and the Nasdaq 100 fell by 0.5%. Hong Kong markets are set to reopen after a holiday.
The Fed’s half-point cut was accompanied by projections suggesting a narrow majority anticipated an additional 50 basis points of cuts in the remaining policy meetings this year, while markets were pricing in a more aggressive 70 basis points. Fed Chair Jerome Powell advised caution against assuming ongoing significant rate reductions.
Chamath de Silva, head of fixed income at Betashares Holdings, remarked that he doesn’t expect significant moves in Asian markets, noting they may remain relatively unchanged as traders await further insights from the U.S. market reaction.
The dollar index reversed gains early Thursday, while the yen strengthened to around 142 per dollar. Treasury 10-year yields rose six basis points to 3.7%.
In the U.S., equities surged briefly on Wednesday, especially among economically sensitive companies, pushing the S&P 500 up by as much as 1% before retreating. Despite minor declines across major assets, this synchronized pullback was the first following a Fed policy decision since June 2021. Gold retreated from a record high, and oil prices dipped amid weak demand signals overshadowing escalating tensions in the Middle East.
Bret Kenwell from eToro commented that a pullback after the Fed announcement was reasonable, yet the long-term outlook remains optimistic as long as the economy remains stable and inflation doesn’t escalate.
Upcoming economic data from Asia includes unemployment figures for Australia and Hong Kong, trade statistics for Malaysia, and an interest rate decision from Taiwan. Mark Hackett from Nationwide noted that the market’s lack of directional movement post-Fed meeting was unexpected, with the S&P 500 struggling to surpass July’s record high.
Treasuries slipped following the Fed’s decision, with updated forecasts projecting the funds rate to decrease to 4.375% by year-end. Market expectations will now face scrutiny against Fed actions, particularly in light of employment data.
Key Upcoming Events:
- UK rate decision (Thursday)
- US Conference Board leading index, initial jobless claims, existing home sales (Thursday)
- FedEx earnings report (Thursday)
- Japan rate decision (Friday)
- Eurozone consumer confidence (Friday)
Market Highlights:
- Stocks: S&P 500 futures rose 0.4%; Hang Seng futures remained flat; S&P/ASX 200 futures fell 0.5%.
- Currencies: Bloomberg Dollar Spot Index down 0.2%; euro stable at $1.1123; yen steady at 142.19 per dollar; Australian dollar up 0.1% at $0.6772.
- Cryptocurrencies: Bitcoin rose 0.6% to $60,582.19; Ether increased 0.6% to $2,340.47.
- Bonds: Australia’s 10-year yield climbed six basis points to 3.92%.
- Commodities: West Texas Intermediate crude fell 0.8% to $70.33 a barrel; spot gold was unchanged.
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