Asian Stocks to Rise as Fed’s Rate Cut Lifts Mood: Markets Wrap

(Bloomberg) — Asian equities were set to echo gains on Wall Street after the Federal Reserve cut interest rates and Chair Jerome Powell voiced optimism that the economy will strengthen as the inflationary impact from tariffs proves temporary.

Equity index futures for Japan, Australia and Hong Kong all climbed early Thursday in Asia after the S&P 500 closed Wednesday 0.7% higher, just short of all-time highs. The Nasdaq 100 ended the day in the green while the Russell 2000 gauge of small-caps jumped 1.3% to a record.

Bonds rallied, stalling a prior run up in yields that pushed one global gauge to its highest since 2009. The US 10-year yield fell around four basis points Wednesday, while the policy-sensitive two-year yield fell eight basis points. The dollar weakened.

The Fed’s quarter-point rate reduction, along with the authorization of fresh Treasury purchases to supply bank reserves, allowed traders to look past a slight tamping down of expectations for further policy easing. Powell characterized the action as a “further normalization of our policy stance” which should serve to bolster the labor market without whipping up price pressures in the economy.

“Overall, a moderately hawkish cut not a max hawkish cut,” according to Evercore ISI’s Krishna Guha. He viewed Powell’s take at the press conference on productivity and growth as “very risk friendly.”

The bullish sentiment was dealt a partial blow after markets closed in New York on Wednesday with Oracle Corp. missing second-quarter revenue estimates, weakening its shares in post-market trade. The company’s fate is deeply tied to the artificial intelligence boom and a downbeat earnings could bleed through to other AI wagers.

In Asia, data set for release includes Tokyo office vacancies for Japan and a Philippines interest rate decision.

Gold and silver climbed Wednesday, as did oil. West Texas Intermediate rose more than 1%, as news broke that US forces intercepted and seized a sanctioned oil tanker off the coast of Venezuela, marking a serious escalation of tensions between the two countries.

Earlier, Bank of Canada held interest rates steady, saying current borrowing costs were appropriate to mitigate the trade war damage.

Nine out of 12 voters on the Fed’s rate-setting committee supported the decision to lower rates. The reduction and the Fed’s tone matched Wall Street expectations for a “hawkish cut,” while officials left intact their outlook for a single cut in 2026.

The impact of Trump’s on-again, off-again tariff offensive has been a key consideration in how the Fed approaches efforts to bring inflation back down to its 2% target. Without the levies, inflation is probably “in the low 2s” right now, Powell said at the press conference following the decision. And their impact is likely to weaken in the second half of next year.

Powell also underscored the importance of upcoming economic reports while advising caution on assessing household jobs readouts, given technical distortions after a government shutdown caused a data blackout.

“The Fed emphasized that future moves will be data-dependent, shifting firmly to a meeting-by-meeting approach,” said Daniel Siluk, a portfolio manager at Janus Henderson Investors. “Chair Powell reinforced this stance in his press conference, noting that the Committee sees today’s cut as a ‘prudent adjustment’ rather than the start of a new cycle.”

Some of the main moves in markets:

Stocks

Hang Seng futures rose 0.3% as of 7:05 a.m. Tokyo time S&P/ASX 200 futures rose 0.9% Currencies

The Bloomberg Dollar Spot Index fell 0.4% The euro was little changed at $1.1690 The Japanese yen was little changed at 155.95 per dollar The offshore yuan was little changed at 7.0625 per dollar The Australian dollar was little changed at $0.6677 Cryptocurrencies

Bitcoin rose 0.1% to $92,513.7 Ether was little changed at $3,343.6 Bonds

Australia’s 10-year yield declined five basis points to 4.76% Commodities

Spot gold rose 0.5% to $4,228.84 an ounce This story was produced with the assistance of Bloomberg Automation.

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