The Fed’s 50 basis points rate cut has sparked significant movements across global financial markets. The U.S. dollar rebounded after an initial dip, while Asian stocks surged, and long-term bond yields rose. The Federal Reserve’s decision has left a path open for a potential soft landing of the U.S. economy.
Overnight, the S&P 500 hit record highs, although it closed slightly lower. However, futures rose in Asia, with Nasdaq futures increasing by 1%, European futures up by 1%, and FTSE futures climbing by 0.8%. Japan’s Nikkei also jumped 2.3%, with stock markets in Australia and Indonesia reaching new records.
In response to the Fed’s 50 basis points rate cut, U.S. Treasury yields climbed nearly eight basis points to 3.719%. Gold prices also rose sharply, briefly reaching a record high of $2,600 per ounce before settling at $2,559.
Market participants largely anticipated the rate cut, which brought the Fed’s policy rate window to 4.75%-5%. According to BNZ strategist Jason Wong, the focus was never on the size of the cut but rather on the Fed’s forward guidance. Jerome Powell emphasized that the Fed’s future moves would be flexible, adapting to the evolving economic landscape.
In Asia, China’s stocks saw gains, driven by expectations of policy easing, while Hong Kong’s Hang Seng index jumped 1.9%. Meanwhile, South Korean chipmakers experienced a sharp selloff.
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