Global Markets Surge on Fed's 50-Basis-Point Rate Cut

The dollar rose, long-dated bond yields increased, and Asian stocks surged after the Federal Reserve announced a 50-basis-point rate cut. The S&P 500 hit a record high. Japan's Nikkei jumped 2.3%, and Chinese bond yields fell. The Bank of England is next to decide on rate changes.

The dollar rose, long-dated bond yields increased, and Asian stocks surged after the Federal Reserve announced a 50-basis-point rate cut and indicated a measured easing cycle ahead. This helped pave the way for a potential soft landing for the U.S. economy. The S&P 500 hit a record high overnight, although it closed slightly lower. Futures for the S&P 500 and Nasdaq climbed 1% through Asia's trading session. European futures rose 1%, while FTSE futures increased by 0.8%.

Japan's Nikkei saw a considerable rise of 2.3%, and stock markets in Australia and Indonesia hit record highs. Expectations of economic stimulus in China drove down Chinese bond yields and boosted equity indexes in Hong Kong and mainland China. The Federal Reserve lowered its window for the benchmark policy rate by 50 basis points to 4.75%-5%, aligning with trader expectations. Initially, the dollar fell, reaching a two-and-a-half-year low against sterling before bouncing back sharply.

Strategist Jason Wong from BNZ said, "The key was never about 25 or 50 basis points; it's about the path forward. They've shown that the economy is still performing well. This wasn't a panicked cut." Meanwhile, ten-year Treasury yields rose about eight basis points to 3.719%. Gold prices hit a record high near $2,600 an ounce before settling at $2,559.

The Federal Reserve's policymakers revised their median rates projection downwards to align more closely with market expectations. Chair Jerome Powell emphasized the need for flexibility: "We're recalibrating policy over time to a more neutral level based on economic developments."

The focus now shifts to the Bank of England, where traders have reduced the chances of a rate cut amid persistent services inflation. Markets are priced for rates to stay at 5%. In China, bond yields decreased and the CSI300 blue chip index rose by 0.7%, driven by gains in liquor and property stocks. Hong Kong's Hang Seng jumped 1.9%. China's yuan hit a 16-month high and MSCI's Asia-Pacific index (excluding Japan) climbed 1%.

(With inputs from agencies.)