Markets in Europe and Asia reacted positively on Thursday after the Federal Reserve initiated measures to prevent a recession in the U.S. by making a larger-than-expected cut to interest rates. U.S. futures showed an upward trend following a subdued response on Wall Street to the Fed’s action the previous day. The S&P 500 future surged by 1.3%, while the Dow Jones Industrial Average future was up by 0.8%.
In European markets, Germany’s DAX rose by 0.8% to 18,861.88, the CAC 40 in Paris advanced by 1.3% to 7,541.50, and London’s FTSE 100 gained 0.9% to 8,326.93. In Asian trading, Tokyo’s Nikkei 225 index climbed by 2.1% to 37,155.33, driven by a rise in shares of major export manufacturers such as Toyota Motor Corp., Sony Group Corp., and Hitachi Ltd.
Hong Kong’s Hang Seng index increased by 2% to 18,013.16, while the Shanghai Composite index went up by 0.7% to 2,736.02, and Taiwan’s Taiex closed 1.7% higher. South Korea’s Kospi also saw a rise of 0.2% to 2,580.80.
The Bank of Japan and the Bank of England were set to hold monetary policy meetings during the week, with no expected rate changes, but market sentiment could be influenced by the central banks’ statements. The Fed’s rate cut had been widely anticipated, leading to a minor market rally before the actual announcement, resulting in a relatively muted reaction on Wall Street.
The latest rate cut by the Federal Reserve marked the first reduction in over four years, ending a long period where rates were maintained at a two-decade high to control inflation. The Fed’s move is expected to ease the pressure on the slowing economy caused by high rates and boost prices across various investment sectors.
Fed Chair Jerome Powell highlighted the importance of supporting the labor market during periods of strength rather than when job cuts begin, emphasizing the current focus on balancing job growth and inflation concerns. The Fed’s decision sparked fluctuations in Treasury yields and halted trading for Tupperware Brands, which filed for Chapter 11 bankruptcy protection.
Furthermore, U.S. benchmark crude oil prices rose by 98 cents to $70.86 per barrel on the New York Mercantile Exchange, while Brent crude, the global standard, increased by 97 cents to $74.58 per barrel. The dollar also saw a rise against the Japanese yen and the euro in electronic trading.
