The S&P 500 reached a record high overnight and although it closed slightly down, futures gained 1% through the Asia day and Nasdaq futures added 1%
The dollar bounced, long-dated bond yields were higher and Asian stocks soared after the Fed announced a 50 bp rate cut and flagged a measured easing cycle ahead, leaving open a path to a soft landing for the U.S. economy.
The S&P 500 reached a record high overnight and although it closed slightly down, futures gained 1% through the Asia day and Nasdaq futures added 1%. European futures were 1% higher and FTSE futures jumped 0.8%.
Japan’s Nikkei climbed 2.3% and stock markets in Australia and Indonesia reached record highs, while bets that stimulus was on the way in China drove down Chinese bond yields and sent Hong Kong and mainland equity indexes higher.
The Federal Reserve lowered its window for the benchmark policy rate by 50 bps to 4.75%-5%, where traders had been leaning before the decision. The dollar first declined broadly, reaching a two-and-a-half-year low on sterling, but then rebounded sharply.
The key was never going to be about 25 or 50, it is all about the path forward and I think they have outlined a view where the economy is still doing pretty well, according to BNZ strategist Jason Wong in Wellington. This wasn’t a panicked 50 bp cut.
The dollar was last well above lows on the euro at $1.1127 and steady around 142.70 yen, after jumping as high as 143.95.
Ten-year Treasury yields have jumped almost 8 bps from a day earlier to 3.719%, and gold soared to a record high just short of $2,600 an ounce, before dropping back to steady at $2,559.
Policymakers adjusted their median rates projection downwards, bringing them more or less in line with market expectations, but Chair Jerome Powell emphasised flexibility.
I do not think that anyone should look at this and say, oh, this is the new pace, Powell told reporters after the outsized cut was announced.
We’re recalibrating policy down over time to a more neutral level. And we’re moving at the pace that we think is appropriate, given developments in the economy, he added.
