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Markets Update: Despite the Federal Reserve's significant rate cut, the market response has been subdued. Experts caution that the current calmness may be temporary, as there is a possibility of market volatility. Bond yields have surged, and small-cap stocks have exhibited a varied reaction.
Economic Calendar
Global Markets Roundup: 19 September 2024
NI225 | HSI | ES1! | FESX1! | USDJPY | EURUSD | DXY | USDCHF | WTI CL1! | GOLD | ZC1! | CC2! | NVDA
The dollar rebounded, long-term bond yields increased, and Asian stocks climbed following the U.S. Federal Reserve's announcement of a 50-basis-point rate cut and indication that its approach to easing would be gradual. The S&P 500 index SPX reached a new peak recently, and while it closed marginally lower, futures for ES1! surged by 0.67% during the Asian trading session. Nasdaq futures NQ1! were also up by 1%. Japan's Nikkei index NI225 soared by 2.5%, and both the Australian stock market XJO and Indonesia's (.JSKE) set record highs.
The Federal Reserve's rate cut is anticipated to bolster spending and the U.S. economy, as well as prompt other central banks to follow suit. Although policymakers revised their median rate projection downward from July, Fed chair Jerome Powell stressed the importance of maintaining flexibility. Powell informed reporters that the significant rate cut should not be interpreted as a signal for a new trend. He emphasized that the policy adjustments are gradual, aiming to reach a more neutral level over time while responding appropriately to economic developments.
In response to the Fed's move, MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) rose by 0.3%. Hong Kong's HSI and China's 3399300 saw widespread gains due to expectations of increased stimulus measures from Beijing. Chinese bond yields experienced a decline, while South Korean markets, including KOSPI, opened lower following a pessimistic note from Morgan Stanley that slashed SK Hynix's target price, leading to a sell-off in chip stocks. SK Hynix shares (000660) dropped by 8.7%, and Samsung (005930) fell by 3.1%.
The Federal Reserve reduced its benchmark policy rate window by 50 basis points to 4.75-5%, a level that traders had anticipated prior to the decision. US10Y Treasury yields have increased by almost eight basis points compared to the previous day, reaching 3.719%. Early on Thursday, the USD gained nearly 1% against the yen, reaching 143.55 USDJPY, and recovered significantly from its lows against the euro at $1.1097. Following the Fed's announcement, the dollar initially dropped to a two-and-a-half-year low against the pound before rebounding sharply. On Thursday, the dollar index DXY surpassed 101.3, extending its recovery from 14-month lows in response to Federal Reserve Chair Jerome Powell's comments after the central bank's significant rate reduction.
Oil prices dropped, with benchmark Brent crude futures BRN1! decreasing by 0.3% to $73.42 per barrel, WTI crude futures CL1! for October, dropped by 3 cents to reach $70.88 per barrel. Meanwhile, GOLD surged to nearly $2,600 per ounce, setting a new record, before stabilizing at $2,559. Copper has risen in early Asian trading. The three-month LME copper contract is currently up by 0.1% at $9,406.00 per ton. November robusta coffee RC2! increased by 0.6% to reach $5,334 per ton. New York cocoa CC1! for December saw a rise of 2.5% to $7,814 per ton. Additionally, March London cocoa C2! experienced a 1.3% increase, reaching $4,649 per ton. Despite reaching three-month highs, wheat futures declined due to strong Black Sea exports compensating for weak production in Europe. Corn prices also dropped as the U.S. harvest gained momentum. The soybean contract with the highest trading volume on the Chicago Board of Trade (CBOT) ZS1! decreased by 0.6% to $10.08 per bushel, while CBOT corn ZC1! went down by 0.6% to $4.10-1/4 per bushel, and wheat ZW1! fell by 0.7% to $5.71-1/2 per bushel.
Later today, the Bank of England is expected to keep rates unchanged at 5%, especially following the increase in services inflation seen in August. The Bank of Japan, on the other hand, will announce its policy decision on Friday and is anticipated to maintain the status quo while preparing for potential rate hikes in the near future, possibly as early as October.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team
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