(Bloomberg) — Asian stocks advanced following a rally on Wall Street after the Federal Reserve signaled it still sees room to cut interest rates later this year because any increase in inflation due to tariffs will be brief.
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MSCI’s regional stock benchmark climbed to its highest since early November as equities in Taiwan, Australia and South Korea all rallied. US equity futures edged higher after the S&P 500 posted its biggest advance on a Federal Reserve policy-decision day since July. Japanese markets are shut for a holiday.
Treasury futures edged higher, extending gains from Wednesday, while cash Treasuries are shut in Asia due to the holiday in Japan. Australia’s dollar weakened after a report showed employment in the nation fell by 52,800 last month, compared with a forecast increase of 30,000. Copper climbed above $10,000 a ton amid the threat of higher tariffs.
“The Fed’s commentary will feed into dollar weakness going ahead and ease the pressure on capital outflows from Asian markets,” said Rajat Agarwal, an Asia strategist at Societe Generale SA. As US financial conditions ease on rate-cut bets and slower balance sheet runoff, it may eventually boost inflows into Asian and emerging markets stocks, he said.
Chinese shares bucked the positive trend, with the mainland benchmark CSI 300 Index falling for the first time in three days. Technology companies were among the biggest losers following their recent rally. In Hong Kong, the Hang Seng Index slipped as much as 1.7%.
“The risk-reward for China looks slightly less reasonable,” Sundeep Gantori, an analyst at UBS Global Wealth Management in Singapore, said on Bloomberg Television. “The risk-reward looks much better for US tech after the recent correction. It doesn’t mean there is no upside for China. We see decent upside perhaps low teens and maybe 10% for the rest of the year.”
Tencent Holdings Ltd. shares dropped even after the firm on Wednesday posted its fastest pace of revenue growth since 2023. In South Korea, Samsung Electronics Co. rose after the company pledged to strengthen its position in the high-bandwidth memory chip market in response to shareholder criticism.
Fed Decision
The Fed kept its benchmark on hold Wednesday as economists expected, and Chair Jerome Powell was measured in his assessment of how the President Donald Trump’s actions might shape the economy. Powell cited the potential for the impact of tariffs on inflation to be “transitory.”
“The market will read this as dovish at the margin, with the Fed not overtly concerned with the economy or inflation. Stocks and bonds rejoice,” said Christian Hoffmann, a portfolio manager at Thornburg Investment Management.
US stocks rallied despite changes to Fed forecasts that could be viewed as bearish for equities, among them a tamping down of growth expectations in 2025 and a higher estimate of inflation.
Powell’s calibrated tone on recession risk – stating it was “not high” – soothed nerves among stock investors. The central bank’s move to trim growth assessments also added fuel to the bond rally, with traders and the Fed now aligned on the rate-cut outlook this year.
‘Pretty Dovish’
“Powell came in and gave a pretty dovish performance in the sense of, ‘We got this, we’re in a good place, we can afford to wait, we’ll see how it goes, we’re gonna get the job done’,” Bill Dudley, the former president of the New York Fed, said on Bloomberg Television.
Chinese banks held their benchmark lending rates for a fifth straight month in the absence of more monetary easing. Later Thursday, the Bank of England is forecast to leave interest rates unchanged, while the Swiss National Bank is tipped to cut them by 25 basis points, according to consensus forecasts.
Oil prices inched higher after gaining on Wednesday following a US government report that allayed concerns about near-term demand destruction. Gold was little changed.
Copper marched past the key threshold of $10,000 a ton after weeks of global trade dislocation triggered by Trump’s push for tariffs on the crucial industrial metal.
Some of the main moves in markets:
Stocks
S&P 500 futures rose 0.5% as of 1:07 p.m. Tokyo time
Nikkei 225 futures (OSE) rose 0.3%
Australia’s S&P/ASX 200 rose 1.1%
Hong Kong’s Hang Seng fell 1.2%
The Shanghai Composite was little changed
Euro Stoxx 50 futures were little changed
Currencies
The Bloomberg Dollar Spot Index fell 0.1%
The euro was little changed at $1.0910
The Japanese yen rose 0.2% to 148.32 per dollar
The offshore yuan was little changed at 7.2379 per dollar
Cryptocurrencies
Bitcoin rose 0.6% to $85,884.76
Ether fell 0.6% to $2,023.36
Bonds
The yield on 10-year Treasuries declined four basis points to 4.24%
Japan’s 10-year yield advanced one basis point to 1.515%
Australia’s 10-year yield declined six basis points to 4.36%
Commodities
This story was produced with the assistance of Bloomberg Automation.
–With assistance from April Ma.
(An earlier version of this story was corrected to delete an extra ‘not’ in paragraph after Fed Decision subhead)
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