Equities in Australia and South Korea rose alongside Hong Kong share futures. Contracts for the S&P 500 and the Nasdaq 100 both climbed to compound Wednesday’s advances ignited by a tech rally. Nvidia Corp. surged 13% during the main session on Wednesday while Meta Platforms Inc. increased around 5% in post-market trade after beating sales forecasts.
Wall Street gains were driven by signs the Fed will cut rates after leaving borrowing costs unchanged in its Wednesday meeting. Notably, the committee shifted to saying it is “attentive to the risks to both sides of its dual mandate,” rather than prior wording focused just on inflation. In a press conference, Fed Chair Jerome Powell said officials could cut rates “as soon as” September.
“It’s certainly going to be a double-reward day for the Asian market,” said Hebe Chen, an analyst at IG Markets. “The certainty of the September rate cut, in the most specific way ever, will dissipate any remaining concerns and instill the strongest confidence seen in months to the market participants,” while worries over the tech sector will likely dissipate, she said.
BloombergTreasuries slipped in early Asian trading to partly unwind a Wednesday rally across the curve. The US 10-year yield fell 11 basis points Wednesday to 4.03%, a level not seen since February. Gains for US debt also reflected reports that Iran had ordered retaliation against Israel for the killing of a Hamas leader on its soil. An index of dollar strength had its worst day since May.
Australia and New Zealand yields fell early Thursday, tracking gains for Treasuries in the prior session.
The drop in US yields added further fuel for a rally in the yen. The Japanese currency extended gains early Thursday after falling below 150 per dollar on Wednesday, a level not seen since March, after the Bank of Japan raised rates and announced plans to cut bond purchases.
“The Fed finally suggested that the rate cut is likely to come soon, which Asian markets have been waited for a long time,” said Tomo Kinoshita, global market strategist at Invesco Asset Management Japan. “Most of the Asian currencies are likely to gain against the US dollar in the short term.”
In commodities, West Texas Intermediate rose early Thursday to compound its 4.3% advance Wednesday, the biggest daily jump in more than two years. Gold was steady after climbing Wednesday.
Federal Reserve
The changes in the Fed statement solidify a shift in tone among several policymakers, including Powell, recognizing growing risks to the labor market. They are also likely to reinforce expectations among economists and investors for a rate cut at the central bank’s Sept. 17-18 gathering.
“Powell so wants to say today ‘let’s do it’ — but at the same time, he knows he doesn’t have to commit just yet before he gets more time and data,” said Peter Boockvar at the Boock Report.
Given markets were already fully priced for a September cut, neither the Fed’s statement nor Powell’s remarks dramatically changed the rate path into the bond market, according to Tiffany Wilding at Pacific Investment Management Co.
Interest-rate swaps showed traders are still fully priced in a quarter point cut in September — and a total of almost 70 basis points worth of reductions for the year.
“The data has moved in Powell’s direction and now he’s getting ready to follow,” said David Russell at TradeStation. “Jobs data on Friday and CPI in two weeks are the next big items. If those go well, we could get clearer messaging from Powell at Jackson Hole in late August.”
