(Bloomberg) -- Asian equities climbed Friday after stocks, bonds and commodities all rallied in the US as the Federal Reserve cut interest rates.
Australian, Japanese, South Korean and Chinese shares all advanced, supporting a second day of gains for a region-wide equity gauge. That was after the S&P 500 rose 0.7% and the Nasdaq 100 climbed 1.5%, both setting fresh peaks. Treasuries ticked lower in Asia while US equity futures were little changed.
Investors are shifting focus from the Fed to China, where lawmakers are expected to approve a fiscal package worth trillions of yuan, potentially offsetting the impact of potential US trade tariffs under Donald Trump.
Such measures may include support for local government debt and consumer spending, according to Michelle Lam, greater China economist for Societe Generale. Any new policies must be balanced against the prospect of potential tariffs, she said, noting that the 60% levies mooted by Trump may fail to emerge.
“We have so much uncertainty coming from the US tariffs,” Lam said. “We might see some smaller increase in tariffs of around 15% to 20% and that is more reasonable” for the Chinese economy to absorb, she said.
Thursday’s cross-asset rally was helped along by comments from Fed Chair Jerome Powell who pointed to the strength of the US economy and said he doesn’t rule “out or in” a December rate cut. Powell added the election will have no effect on policy in the near term, and said he would not step aside if asked by Trump.
“Powell & Co. reminded investors about the solid economic footing the US continues to stand on,” said Bret Kenwell at eToro. “Powell would not tip his hand on whether the Fed would likely cut rates in December, which shouldn’t surprise investors. However, the Fed appears more comfortable with the labor market and the current US economic backdrop than they did a few months ago.”
Bloomberg’s dollar index was little changed in Asia after sliding 0.8% Thursday, its worst day since August, as the greenback trimmed its post election gains. The yen drifted lower Friday after rallying 1.1% the day before to largely erase its declines against the dollar this week.
Local Chinese banks are joining more higher-yielding offshore loans of mainland firms as rates fall at home amid monetary easing measures.
Elsewhere in Asia, Japanese automaker Nissan Motor Co., will dismiss 9,000 workers and cut a fifth of its manufacturing capacity after net income plummeted 94% in the first half. South Korea said it will bolster its monitoring of financial markets and respond “actively” to ease any excessive volatility.
Fed officials unanimously lowered the federal funds rate 25 basis points and tweaked language to note “labor market conditions have generally eased,” and repeated “the unemployment rate has moved up but remains low.” The statement removed the reference to “further” inflation progress, noting inflation “has made progress toward the committee’s 2% objective but remains somewhat elevated.”
A Bloomberg gauge of the “Magnificent Seven” megacaps added 2.3%. Lyft Inc. jumped 23% after the ride-hailing company gave a bullish outlook. A closely watched gauge of banks dropped 2.7% after gaining over 10% in the previous session. JPMorgan Chase & Co. slid 4.3% after an analyst downgrade.
Gold trimmed some of its advance from Thursday, while oil headed for a weekly gain. Bitcoin was little changed.
Some of the main moves in markets:
Stocks
- S&P 500 futures were little changed as of 10:32 a.m. Tokyo time
- Japan’s Topix rose 0.2%
- Australia’s S&P/ASX 200 rose 1%
- Hong Kong’s Hang Seng rose 1.4%
- The Shanghai Composite rose 0.8%
- Euro Stoxx 50 futures rose 0.4%
Currencies
- The Bloomberg Dollar Spot Index rose 0.1%
- The euro fell 0.2% to $1.0781
- The Japanese yen fell 0.3% to 153.36 per dollar
- The offshore yuan fell 0.2% to 7.1619 per dollar
Cryptocurrencies
- Bitcoin rose 0.4% to $76,249.52
- Ether rose 1.1% to $2,925.48
Bonds
- The yield on 10-year Treasuries advanced two basis points to 4.35%
- Japan’s 10-year yield declined one basis point to 0.990%
- Australia’s 10-year yield declined six basis points to 4.57%
Commodities
- West Texas Intermediate crude fell 0.4% to $72.10 a barrel
- Spot gold fell 0.3% to $2,699.89 an ounce
This story was produced with the assistance of Bloomberg Automation.
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