“Thursday’s Market Rollercoaster Trading: Fed’s Impact on Asian Markets”

Asian markets experienced fluctuations in Thursday’s trading session after US stocks ended mixed as the Federal Reserve postponed interest rate cuts. US futures increased, and oil prices were higher. Tokyo’s Nikkei 225 index lost 0.1%, closing at 38,236.07. The Japanese Yen initially surged by 2% in early Asia hours, owing to speculations of another round of Yen-buying intervention by Japanese authorities and a weaker US dollar following the Fed meeting. Later, the Yen reversed its course and erased the previous gains, with the dollar trading at 155.31 Yen, up from 154.91 Yen.

Stephen Innes, managing partner at SPI Asset Management, interpreted the Japanese Ministry of Finance, via the Bank of Japan, to be back selling US dollars to stabilize the Yen. The Japanese government is looking to take profit on the dollar they bought back in 2000, digging into their sizable 1.2-trillion-USD war chest. The hope was to stabilize Yen around 155-157 to the dollar.

The Kospi in South Korea was down 0.2%, closing at 2,686.30, after official data showed the country’s consumer prices in April reached 2.9% year on year, a slower pace compared to the data in March. Hong Kong’s Hang Seng index added 2.4% to 18,190.32. Other markets in China remained closed for the Labor Day holiday.

Australia’s SandP/ASX 200 advanced 0.2%, closing at 7,587.00. On Wednesday, the SandP 500 fell 0.3% to 5,018.39 after the Fed held its main interest rate at its highest level since 2001, just as markets expected. The index had rallied as much as 1.2% in the afternoon before giving up all the gains at the end of trading. The Dow Jones Industrial Average rose 0.2% to 37,903.29, and the Nasdaq composite lost 0.3%, closing at 15,605.48.

During the Fed meeting, Chair Jerome Powell shared the fear that has recently caused stock prices to decline, which erased traders’ hopes for imminent cuts to interest rates. Powell said, “In recent months, inflation has shown a lack of further progress toward our 2% objective.” He also stated that it will take longer than previously expected to get confident enough to cut rates, a move that would ease pressure on the economy and investment prices. At the same time, Powell calmed the fear swirling in the market that inflation remained so high that additional hikes to rates may be necessary. “I think it’s unlikely that the next policy rate move will be a hike,” he said.

The Fed also offered financial markets some assistance by stating that it would slow the pace of how much it is shrinking its holdings of Treasurys. Such a move could grease the trading wheels in the financial system, offering stability in the bond market.

Traders had already downshifted their expectations for rate cuts this year to one or two, if any, after coming into the year forecasting six or more. That is because they saw the same string of reports as the Fed, which showed inflation remaining stubbornly higher than forecast this year. Powell had already hinted that rates may stay high for a while. That was a disappointment for Wall Street after the Fed earlier indicated it was penciling in three cuts to rates during 2024.

One report from the Institute for Supply Management said the US manufacturing sector unexpectedly contracted last month. A separate report said US employers were advertising slightly fewer jobs at the end of March than economists expected. The hope on Wall Street has been that a cooldown could help prevent upward pressure on inflation. The downside is that if it weakens too much, a major support for the economy could give out.

In energy trading, benchmark US crude ended three days of decline and rose 50 cents to USD 79.50 a barrel. Brent crude, the international standard, was up 59 cents to USD 84.03 a barrel. In currency trading, the Euro cost USD 1.0718, up from USD 1.0709