European and Asian markets surged on Thursday following a substantial interest rate cut by the Federal Reserve aimed at averting a U.S. recession.
U.S. futures experienced an uptick post-Fed announcement, with the S&P 500 rising 1.3% and the Dow Jones Industrial Average increasing by 0.8%.
Germany’s DAX soared 0.8%, closing at 18,861.88, while France’s CAC 40 advanced 1.3% to finish at 7,541.50. London’s FTSE 100 also reported gains, rising 0.9% to 8,326.93.
In Asia, Tokyo’s Nikkei 225 index surged by 2.1% to 37,155.33, bolstered by significant gains among major exporters. Notable increases included Toyota Motor Corp. at 5.1%, Sony Group Corp. at 2.9%, and Hitachi Ltd. at 5.8%.
Hong Kong’s Hang Seng index climbed 2% to 18,013.16, while the Shanghai Composite rose 0.7% to 2,736.02. Taiwan’s Taiex finished 1.7% higher, and South Korea’s Kospi inched up by 0.2% to close at 2,580.80.
Central banks in Japan and England are also in the midst of monetary policy discussions this week, with no immediate changes to rates expected. However, their statements may provide insight into future decisions, potentially influencing market trends.
The Fed’s recent half-percentage point rate cut had been widely anticipated, leading to a muted response from Wall Street. Analysts noted that the market’s prior climb in expectation of this cut contributed to the subdued reactions.
Experts from Capital Economics indicate that any further cuts may not significantly affect market dynamics, highlighting the anticipation around the Fed’s decision.
This marks the Federal Reserve’s first rate cut in over four years, concluding a prolonged period of high rates aimed at controlling historic inflation levels.
Despite the S&P 500 slipping by 0.3% and the Dow decreasing by 0.2% the previous day, the Fed’s rate cut is expected to provide relief to financial markets, facilitating economic growth and investment value.
Inflation, which has significantly decreased from its peak, is projected to approach 2%, allowing the Fed to focus more on sustaining job market stability and overall economic vigor.
Federal Reserve Chair Jerome Powell stated that proactive support for the labor market is essential, emphasizing the current focus on economic conditions rather than reactive measures to unemployment.
Critics suggest the Fed may have maintained high rates for too long, but Powell maintains confidence in their current strategy, asserting that the balance between job stability and inflation control is now crucial.
Treasury yields fluctuated following the announcement, mirroring the impact on stock prices as investor sentiment adjusted to the news.
Meanwhile, shares of Tupperware Brands remained halted after the company filed for Chapter 11 bankruptcy protection, with its stock plummeting from over $30 during the pandemic to just 51 cents.
In commodities, U.S. benchmark crude oil rose by 98 cents to $70.86 per barrel, while Brent crude increased by 97 cents to $74.58 per barrel.
The dollar strengthened against the yen, rising to 142.88 from 142.29, while the euro also saw gains, moving up to $1.1151 from $1.1120.