The US dollar strengthened, long-dated bond yields rose, and Asian stocks saw gains after the Federal Reserve (Fed) began its easing cycle with a 50 basis point rate cut. While the cut supported market optimism, the Fed tempered expectations by signaling a balanced approach aimed at keeping the economy on a stable trajectory.
The S&P 500 hit a record high before closing slightly lower, and futures rose in Asia, with the Nasdaq futures up 0.9% and Japan's Nikkei surging 2%. Australian shares also hit a record high.
Following the Fed's decision to lower the benchmark policy rate to 4.75%-5%, the US dollar initially dropped to a two-and-a-half-year low against sterling but rebounded sharply, gaining nearly 1% against the yen and stabilizing at US$1.1081 against the euro. Ten-year Treasury yields rose by eight basis points, and gold briefly surged to a record near US$2,600 an ounce before stabilizing at US$2,559.
The Fed's rate cut is expected to boost spending and support the US economy, with Fed Chair Jerome Powell emphasizing that future moves would be data-driven and gradual. "We’re recalibrating policy down over time to a more neutral level," Powell said, signaling that the Fed is maintaining a cautious stance.
Asian markets had mixed reactions, with South Korean chipmakers experiencing sharp declines, while Hong Kong’s Hang Seng rose slightly and China’s CSI300 fell 0.4%. In the commodities market, Brent crude dropped 0.3% to US$73.42 a barrel.
The Bank of England and Bank of Japan are set to meet later this week, with expectations of a rate hold from the BoE and possible future hikes from the BoJ.
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