Global Markets Surge as Fed Rate Cut Sparks Optimism

An index for emerging market stocks soared 1% with the currencies index hitting new highs following a significant U.S. interest rate cut. Investors rushed to risk assets as Brazil logged its first rate hike in two years, while major Asian, Gulf, and African economies adjusted their rates accordingly.

Emerging market stocks surged by 1% and the currencies index reached a record high on Thursday, as an unusually large overnight U.S. interest rate cut spurred investors to embrace riskier assets. Brazil also implemented its first rate hike in two years.

The U.S. dollar weakened after the Federal Reserve's half-percentage-point rate reduction on Wednesday, providing emerging market central banks more room to ease policies to boost domestic growth. The MSCI index for EM stocks rose 1%, snapping a four-day losing streak, while the currencies index maintained its record-high level.

Chinese stocks climbed, driven by expectations that U.S. monetary easing would allow Beijing more flexibility to stimulate its flagging economy. The blue-chip CSI300 and Shanghai Composite indices approached two-week highs. A Reuters poll indicated China is likely to reduce its primary policy rate on Friday. Following the Fed's lead, Hong Kong cut its base rate by 50 basis points due to its currency peg with the U.S. dollar.

(With inputs from agencies.)