Asian Shares Rise On Fed Policy Shift

Asian stocks followed Wall Street higher on Thursday, the dollar sank, and bond yields declined after the Federal Reserve held interest rates, as widely expected,
and announced a shift towards cutting borrowing costs against the backdrop of slowing growth and easing inflation.

China’s Shanghai Composite index dropped 0.33 percent to 2,958.99, giving up early gains after data showed new bank lending in China jumped less than expected in November. Hong Kong’s Hang Seng index rose 1.07 percent to 16,402.19.

Japanese shares fell notably to snap a three-day winning streak as the yen hit a four-and-half-month high against the dollar amid the Fed’s dovish pivot.

Traders also watched the latest political developments after three ministers resigned over a major corruption scandal in the ruling party.

The Nikkei average shed 0.73 percent to close at 32,686.25, with banks and automakers pacing the decliners. The broader Topix index closed 1.43 percent lower at 2,321.35 ahead of the Bank of Japan’s two-day policy meeting beginning Monday.

Toyota Motor, Honda Motor, Mitsubishi UFJ Financial and Sumitomo Mitsui Financial gave up 3-5 percent. Staffing agency Recruit Holdings soared 7.2 percent on share buyback news.

Government data showed earlier in the day that Japan’s core machinery orders rose 0.7 percent in October from the previous month.

Seoul stocks posted strong gains, with the Kospi average rallying 1.34 percent to 2,544.18 after the Fed hinted at rate cuts. LG Energy Solution, Naver and SK Hynix jumped 3-4 percent.

Australian markets rallied, led by real estate, tech and gold mining stocks. Insurers lost, with QBE and Suncorp falling 2-3 percent.

The benchmark S&P/ASX 200 climbed 1.65 percent to 7,377.90 after employment far outpaced expectations for a second straight month in November. The broader All Ordinaries index settled 1.74 percent higher at 7,599.40.

Across the Tasman, New Zealand’s benchmark S&P/NZX-50 index rose 0.67 percent to 11,552.88 despite disappointing GDP data for the third quarter.

GDP unexpectedly shrank in the third quarter, fueling bets that the central bank will start cutting interest rates next year.

U.S. stocks closed higher overnight while benchmark slipped to their lowest level since August as the Fed signaled an end to its tightening cycle and confirmed plans to pivot to cutting rates next year, citing slowing inflation and economic growth.

The median forecast indicate rates will be lowered to 4.6 percent by the end of 2024, suggesting the Fed plans to cut rates by 25 basis points three times next year.

During his post-meeting press conference, Fed Chair Jerome Powell acknowledged that rate cuts will be a “topic of discussion” at upcoming meetings.

The Dow spiked 1.4 percent to a record closing high, while the Nasdaq Composite and the S&P 500 also gained about 1.4 percent to reach their best closing levels in almost two years.

Market Analysis