Asian stock markets saw mixed performance on Thursday as they reacted to the Federal Reserve’s substantial interest rate cut, while Japan’s stock market surged thanks to a weakening yen ahead of a key Bank of Japan (BOJ) meeting.
Though regional markets welcomed the Fed’s decision to slash interest rates by 50 basis points, gains were tempered by concerns over a higher projected neutral rate, coupled with worries about potential slowing economic growth. Meanwhile, U.S. stock index futures jumped sharply during Asian trading hours.
Japanese Stocks Rally as Yen Drops Post-Fed; BOJ Meeting Anticipated
Japan’s Nikkei 225 and TOPIX indices outperformed their Asian counterparts, climbing between 2% and 2.8%. The rally was driven by a sharp decline in the yen, which fell from near nine-month highs following the Federal Reserve’s decision. The yen’s weakness was largely a result of the U.S. dollar’s strength after the Fed’s announcement.
Investors in Japan were also positioning ahead of the Bank of Japan’s meeting set for Friday. Analysts remain divided on whether the BOJ will raise interest rates again, but recent signals from central bank officials have been hawkish. Several BOJ representatives suggested that further rate hikes are likely as inflation continues to rise.
Key Japanese inflation data is expected on Friday, which will offer additional guidance for monetary policy decisions.
Asian Markets See Mixed Response to Fed Rate Cut
Elsewhere in Asia, stock market gains were moderate, even as the Federal Reserve’s significant rate cut signaled the start of a potential easing cycle.
Australia’s ASX 200 advanced 0.3%, although stronger-than-expected labor market data limited gains, as it gave the Reserve Bank of Australia more room to maintain higher interest rates for a longer period.
China’s major indices—the Shanghai Shenzhen CSI 300 and Shanghai Composite—rose 0.5% and 0.4%, respectively, continuing a mild recovery from seven-month lows. Hong Kong’s Hang Seng Index added 0.6%.
Attention in China now turns to the People’s Bank of China, which will decide on its loan prime rate on Friday. Analysts predict no changes, as Beijing remains cautious about implementing further stimulus measures.
In contrast, South Korea’s KOSPI fell 0.5%, as the market returned from a three-day holiday, while futures for India’s Nifty 50 indicated a positive opening, with the index nearing record highs.
Fed’s Powell Soothes Recession Fears but Signals Higher Long-Term Rates
Federal Reserve Chair Jerome Powell managed to ease concerns about a possible economic downturn, explaining that the risks of rising inflation and a cooling labor market are now balanced. However, Powell also hinted that neutral rates could remain elevated compared to pre-pandemic levels, with no plans for the ultra-low rates seen during the COVID-19 crisis.
His remarks raised questions about how much more the Fed may cut rates in this easing cycle, leaving investors uncertain about the longer-term interest rate outlook.
