Asian markets surge on Fed’s rate cut signal

March 21, 2024 (MLN): Asian shares rallied after Wall Street set new highs as the Federal Reserve signaled it remains on track for three interest-rate cuts this year despite an uptick in inflation, as Bloomberg reported.

A gauge of regional stocks was set for its best day in four months, powered by gains in tech firms listed in Hong Kong and South Korea following Micron Technology Inc.’s strong revenue forecast on the back of artificial intelligence-induced demand.

Broader benchmarks also rose from Australia to Japan, with the Nikkei 225 on pace for a fresh closing high after the nation’s exports grew for a third consecutive month. Mainland Chinese stocks fluctuated.

Treasuries were steady in Asian trading after an advance Wednesday that reflected an increase in expectations the Fed may cut rates as early as June.

The dollar extended losses, with the yen strengthening for the first time in eight days.

“In addition to bonds benefiting from the fall in yields, Fed’s rate outlook also benefits long duration equities, and regions with high exposure to tech stocks,” said Ray Sharma-Ong, investment director of multi-asset at abrdn. “This would favor regions like Korea and Taiwan, and sectors like Asia REITs.”

US equity futures also advanced, after the S&P 500 climbed 0.9% to a fresh high.

The tech-heavy Nasdaq 100 index, which is more sensitive to policy, rose 1.2% amid a rally in the Magnificent Seven group of mega-caps.

US small-caps, which typically do well when the economy is expanding, also notched the best session in a month.

Fed policymakers kept their outlook for three cuts in 2024 and moved toward slowing the pace of reducing their bond holdings, suggesting they aren’t alarmed by a recent rebound in price pressures.

While Jerome Powell continued to highlight officials would like to see more evidence that prices are coming down, he also said it will be appropriate to start easing “at some point this year.”

Australian bonds erased early gains to inch lower following the release of robust jobs data. The economy added 116,500 roles in February, almost three times the 40,000 forecast.

The data supported the Australian dollar, which strengthened against the greenback.

The New Zealand dollar reversed earlier losses as gross domestic product data showed the country unexpectedly fell into a recession in the second half of 2023.

Output in the fourth quarter contracted 0.1% to mark its second quarter of negative growth.

Gold rallied to trade over $2,200 an ounce for the first time following the Fed comments.

A lower interest rate environment is typically positive for the precious metal, which doesn’t generate interest.

Meanwhile, Bitcoin stemmed a recent decline to advance near $68,000.

West Texas Intermediate, the US oil price, rose after a Wednesday drop.

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