Asian stocks rallied on Thursday after the US Fed weighed in with a hefty interest rate cut, as it emerged the world’s No1 economy was not doing as badly as everyone thought.
The dollar bounced, long-dated bond yields were up and shares across the region surged after the Federal Reserve announced a 50-basis-point rate cut and flagged a measured easing cycle ahead, leaving open a path to a soft landing for the US economy.
Japan’s Nikkei share average posted its highest closing level in more than two weeks, led by exporters as the yen weakened against the dollar on prospects of slower-than-expected future rate cuts in the US.
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The Nikkei share average rallied 2.13%, or 775.16 points, to close at 37,155.33, its highest close since September 3.
The broader Topix was ahead 2.01%, or 51.50 points, to 2,616.87, with Toyota Motor jumping 5% to provide the biggest boost, while Honda Motor climbed 3.35%.
All the 33 industry sub-indexes on the Tokyo Stock Exchange (TSE) traded higher, with shipping firms rising 4.49% to become the best performer.
Against the yen, the greenback gained as much as 1.2% to hit an intraday high of 143.95 earlier in the session.
China shares rebounded from modest early losses, led by gains in real estate developers and consumer goods, on hopes that the start of the long-awaited US rate cuts will give Beijing policymakers more room to stimulate the ailing Chinese economy.
China’s blue-chip CSI300 Index rose 0.79% and the Shanghai Composite Index rose 0.69%, or 18.74 points, to 2,736.02. The Shenzhen Composite Index on China’s second exchange advanced 1.58%, or 23.27 points, to 1,497.00.
The CSI Liquor Index and CSI Real state Index each jumped more than 4%. The consumer staples sector rose 2.45%, the healthcare sub-index added 1.09%, and the financial sector sub-index was higher by 0.48%.
China’s yuan hit a 16-month high of 7.0640 per dollar. China is widely expected to trim its main policy and benchmark lending rates on Friday, a Reuters poll showed.
Hong Kong-listed mainland property stocks advanced 5.9% while local real estate firms were up 2.6% after the interest rate cuts. Hong Kong’s benchmark Hang Seng climbed 2.00%, or 353.14 points, to 18,013.16, while the Hang Seng Tech Index jumped more than 3%.
Elsewhere across the region, in earlier trade, Sydney, Singapore, Seoul, Mumbai, Wellington, Taipei, Manila and Jakarta also advanced. MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1% to a three-week high.
Bank of England Focus
The S&P 500 hit a record high overnight and although it closed slightly lower, futures rose 1% through the Asia day and Nasdaq futures rose 1%. European futures were up 1% and FTSE futures climbed 0.8%.
The Fed lowered its window for the benchmark policy rate by 50 basis points to 4.75%-5% earlier in the day, just where traders had been leaning before the decision. The dollar first fell broadly, hitting a two-and-a-half-year low on sterling, but then recoiled sharply.
The dollar was last well off lows on the euro at $1.1127 and steady around 142.70 yen, after climbing as high as 143.95.
Ten-year Treasury yields have climbed nearly eight basis points from a day earlier to 3.719%, and gold shot to a record high just shy of $2,600 an ounce, before easing back to steady at $2,559.
The focus flicks next to the Bank of England, where sticky services inflation had traders further reducing chances of a cut. Markets are priced for rates to stay at 5%, with a 19% risk of a 25-basis-point cut.
The Bank of Japan rounds out a big week for global policy settings and is expected to stand pat on Friday while lining up future hikes, perhaps as soon as October.
Oil prices were also under pressure and benchmark Brent crude futures hovered around $73.87 a barrel.
Key figures
Tokyo – Nikkei 225 > UP 2.13% at 37,155.33 (close)
Hong Kong – Hang Seng Index > UP 2.00% at 18,013.16 (close)
Shanghai – Composite > UP 0.69% at 2,736.02 (close)
London – FTSE 100 > UP 0.90% at 8,327.60 (0933 BST)
New York – Dow < DOWN 0.25% at 41,503.10 (Wednesday close)
- Reuters with additional editing by Sean O’Meara
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