Asian markets rise after first Fed rate cut in 4 years

Asian markets rose on Thursday after the Federal Reserve began its efforts to avert a US recession with a bigger-than-usual cut in interest rates.

In Tokyo, the Nikkei 225 index rose 2.5% to 37,284.43. Hong Kong’s Hang Seng gained 1 percent to 17,840.93.

The Shanghai Composite rose 0.8 percent to 2,738.19, while Taiwan’s Taiex rose 1 percent.

South Korea’s index was an outlier, losing 0.3% to 2,566.65.

The Bank of Japan and the Bank of England are also holding monetary policy meetings this week. No central bank is expected to move on rates, although the language of what officials are saying could be an indicator of further moves and still influence markets.

Because the Fed’s half-percentage-point rate cut was so well telegraphed, and because markets had already rallied so much in anticipation, Wall Street’s reactions to the 180-degree shift in its policy rate were relatively muted.

“Markets barely reacted to the Fed’s 50 (basis point) rate cut overall, and our base case is that further cuts won’t move the needle much either,” Capital Economics’ Thomas Mathews said in a comment.

It was the first cut in the federal funds rate in more than four years, ending a period in which the Fed kept rates high for two decades to slow the US economy enough to quell the worst inflation in generations.

On Wednesday, the S&P 500 fell 0.3% to close at 5,618.26. The Dow Jones Industrial Average fell 0.2 percent to 41,503.10. The Nasdaq composite lost 0.3 percent to 17,573.30.

The Fed’s big move helps financial markets in two big ways. It eases the brakes on the economy, which has slowed under the weight of higher rates, and gives a boost to prices for all types of investments. In addition to stocks, gold and bond prices have already risen in recent months on expectations that rate cuts will follow.

Now that inflation has fallen significantly from its peak two summers ago and appears headed for 2 percent, the Fed says it can turn more of its attention to protecting the slowing labor market and the overall economy.

“The time to support the labor market is when it’s strong, not when you start seeing layoffs,” Fed Chairman Jerome Powell said. “That’s the situation we’re in.”

Some critics say the Federal Reserve has already kept interest rates too high for too long, but Powell said “We don’t think we’re behind.”

“We think it’s timely. But I think you can take that as a sign of our commitment not to be left behind,” Powell said at a news conference after the Fed’s announcement.

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“The focus has now shifted decisively to the labor market and there is a sense that the Fed is trying to strike a better balance between jobs and inflation,” said Stephen Innes of SPI Asset Management.

Like stock prices, Treasury yields have swung up and down repeatedly right after the Fed announced its tapering and released its projections.

The 10-year Treasury yield finally rose to 3.70 percent from 3.65 percent late Tuesday. The two-year yield, which more closely tracks expectations for Fed action, rose to 3.62 percent from 3.60 percent late Tuesday.

On Wall Street, Intuitive Machines surged 38.3 percent after NASA awarded it a contract worth up to $4.82 billion for communications and navigation services that the space agency will use to establish a presence on long term on the moon.

Trading in Tupperware brands remained halted after the company filed for Chapter 11 bankruptcy protection. Its stock has sunk, as low as 51 cents, since a mini-revival at the start of the pandemic sent its stock over 30 of dollars.

Overall, the S&P 500 fell 16.32 points to 5,618.26. The Dow fell 103.08 to 41,503.10 and the Nasdaq composite lost 54.76 to 17,573.30.

In other trade, benchmark U.S. crude lost 20 cents to $69.68 a barrel in electronic trading on the New York Mercantile Exchange.

Brent crude, the international standard, fell 22 cents to $73.43 a barrel.

The dollar rose to 143.37 Japanese yen from 142.29 yen. The euro fell to $1.1101 from $1.1120.

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AP Business Writer Stan Choe contributed.