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On September 18, the US Federal Reserve delivered an unexpected 50-basis point interest rate cut, exceeding market forecasts and impacting equity markets across the globe. This rate reduction, the first of its kind since early 2020, aimed to bolster investor confidence and stimulate economic activity.
US Markets React with Late Pullback
Despite the initial positive reaction, US equity markets closed in negative territory. The Dow Jones Industrial Average fell by 0.25%, while the Nasdaq Composite Index and S&P 500 experienced declines of 0.31% and 0.29%, respectively. The indices had initially risen following the Fed's announcement but reversed course as the trading day progressed.
Asian Markets Experience Robust Gains
In contrast, Asian equity markets responded enthusiastically to the Fed’s decision. The Hang Seng Index in Hong Kong surged by 1.18%, driven by increased demand for rate-sensitive stocks. This rally was bolstered by the Hong Kong Monetary Authority’s decision to mirror the Fed’s rate cut, which led to a boost in the Hang Seng Mainland Properties Index by 4.77%. Technology stocks also saw gains, with the Hang Seng Tech Index advancing by 2.27%. Major tech companies such as Alibaba and Baidu reported gains of 2.47% and 2.65%, respectively, while Tencent rose by 1.45%.
In mainland China, the CSI 300 and the Shanghai Composite Index saw gains of 1.04% and 0.81%, respectively, reflecting the broader positive sentiment in Asian markets.
Nikkei 225 Benefits from Weaker Yen
The Nikkei 225 Index in Japan rose by 0.49% as investor sentiment improved following the Fed’s rate cut. The depreciation of the Japanese yen against the US dollar supported Japanese export stocks, with Nissan Motor Corp. and Fast Retailing Co. Ltd. experiencing notable gains of 4.18% and 3.06%, respectively. Additionally, the tech sector benefited, with Tokyo Electron and Softbank Group advancing by 1.80% and 2.84%.
ASX 200 Hits New High
In Australia, the ASX 200 Index achieved a new intraday high, climbing 0.25% to reach 8,187. This increase was driven by strong performances in the mining and banking sectors. Notable gains were observed in mining stocks, with Rio Tinto Ltd. rising by 2.55%, BHP Group Ltd. gaining 1.84%, and Fortescue Metals Group Ltd. up by 1.38%. Additionally, Australian banks benefitted from the Fed's rate cut, with ANZ Group Holdings Ltd. and Westpac Banking Corp. advancing by 1.25% and 0.93%, respectively.
Future Outlook and Market Reactions
The Fed’s decision to lower interest rates has injected optimism into global markets, particularly in Asia. The economic projections released by the Fed, indicating a gradual path for future rate cuts and a stable growth forecast, have influenced market dynamics. As markets react to these developments, stakeholders are advised to stay informed and adapt their strategies in response to evolving economic conditions and market trends.
