Janice R. Andrews
After the Federal Reserve cut interest rates by 0.5%, which was seen as a sign of possible future easing, US share futures went through the roof and Japanese stocks did too. The Federal Reserve’s decision to support the US economy has made markets around the world more optimistic. The decision has also made people less worried about a short-term economic slowdown.
The yen fell over 1% against the dollar, which helped Japan’s Topix and Nikkei 225 markets go up. Since investors think that US interest rates will stay high for longer, the yield gap between Japan and the US is growing. At the same time, an MSCI index of regional stocks went up the most in a week, and US stock futures went up after the S&P 500 quickly hit a record high but ended the day down 0.3%.
This was the first rate cut by the Federal Reserve in more than four years. It gave investors confidence that the US economy could avoid going into a slump. A poll by Bloomberg Terminal found that 75% of people think there will be a “soft landing” by the end of 2025. This shows that people are confident in the Fed’s plan. Experts at Nomura Holdings Inc. said that the Fed’s move to lower interest rates could give stock markets a big boost, especially if the US economy avoids a recession.
Fed Chair Jerome Powell said that the central bank will continue to change policy as needed, even if there aren’t any more big cuts in the works. It’s now easier for foreign central banks, like the Bank of Korea, to focus on their own policies without having to worry about controlling exchange rates.
In Asia, the yen kept falling, and it was selling close to 143 yen per dollar. Keiichi Iguchi, an analyst at Resona Holdings Inc., says that the yen’s fall was caused by rising US long-term interest rates and sales by Japanese exporters. US Treasury yields went up as well, and so did rates on American and New Zealand notes.
After Morgan Stanley lowered its rating on the chipmaker SK Hynix Inc., shares of that company fell sharply, which caused The South Korean stock market to go down. Following the Fed’s lead, Hong Kong’s Monetary Authority lowered its base interest rate for the first time since 2020. New Zealand’s economy shrank in the second quarter, which made people worry about the security of the region’s economy.
In other places, gold prices went up a little because more people wanted to buy it after the Fed’s ruling. But oil prices went down because of weak demand in the US and rising political unrest in the Middle East.
To sum up, the Fed’s decision to lower interest rates has made things look better for global stocks, especially those in the US and Asia. It has also helped risky currencies and given people hope that a recession can be avoided. Analysts think that the Fed’s careful but supporting approach will continue to have an effect on market moves in the coming months.
