Stocks, dollar gain as Fed lays out ‘soft landing’ path, by Reuters

By Tom Westbrook

SINGAPORE (Reuters) – The dollar rebounded, long-term bond yields rose and Asian stocks were mostly higher after the U.S. Federal Reserve began its easing cycle with a big rate cut, although it tempered this with a balanced perspective while trying to keep the economy going.

It hit an overnight high before closing slightly lower. Futures rose 0.6 percent on the Asian day, and Nasdaq futures rose 0.9 percent. rose 2% and Australian shares hit a record high. (.FEE)

The Fed cut its benchmark policy rate window by 50 basis points to 4.75-5%, where markets lurched ahead of the decision. The dollar immediately hit a two-and-a-half-year low against the pound, but then bounced back sharply.(FRX/)

It rose nearly 1 percent to 143.55 yen early Thursday and the euro hit a low of $1.1081.

Ten-year Treasury yields rose nearly eight basis points from a day earlier to 3.719%, while gold hit a record high of just $2,600 an ounce before easing back to $2,559 . (US/)(GOL/)

Fed tapering is expected to support spending and the US economy.

“The key is never going to be around 25 or 50, it’s all about the way forward and I think they’ve outlined a view where the economy is still doing quite well,” BNZ strategist Jason Wong said in Wellington. “This was not a panicked 50 (bp) cut.”

Policymakers have revised down their projection for average rates, compared to their July outlook, but Fed Chairman Jerome Powell stressed that the next moves will be data-driven.

“I don’t think anybody should look at this and say, oh, this is the new pace,” Powell told reporters after the huge cut was announced.

“We are recalibrating politics over time to a more neutral level. And we are moving at the pace we consider appropriate, given the developments in the economy”.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.4 percent in early trade, under pressure as South Korean markets returned from vacations, with sharp declines in the chipmaking sector following a Morgan Stanley downgrade.

Shares in SK Hynix fell 9.6 percent and Samsung ( KS: ) fell 2.6 percent. Hong Kong rose slightly, while the mainland benchmark CSI300 fell 0.4%. Oil prices fell, with benchmark futures last down 0.3 percent at $73.42 a barrel. (OR)

In the region, lower US rates theoretically leave room for emerging markets to cut policy rates and support growth.

Bank Indonesia already moved hours ahead of the Fed, cutting 25 basis points on Wednesday. Chinese bond yields fell in early trade on Thursday on expectations of further easing from Beijing to support China’s increasingly sluggish economy.

The Bank of England meets later on Thursday and is seen keeping rates at 5%, especially after inflation figures showed services inflation rose in August. The Bank of Japan sets policy on Friday and is expected to hold off but align future hikes, perhaps as soon as October.