Global Stocks Mixed as Traders Weigh Fed Outlook After Rate Cut

Global stock markets traded unevenly on Thursday after the Federal Reserve delivered its first rate cut of the year. While the move was widely expected, Fed officials signaled a cautious approach to further monetary easing, leaving investors uncertain about the pace of future cuts.

Asia-Pacific Markets Struggle

MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.3%. Weakness in Australian and New Zealand equities dragged the regional benchmark lower. Chinese stocks moved back and forth between gains and losses.

Japan’s Nikkei 225 rose 1.2%, while South Korean and Taiwanese shares climbed 1.2% and 1.3% respectively.

Wall Street Reacts to Powell’s Comments

On Wednesday, global stocks briefly hit record highs after the Fed cut its benchmark rate by 25 basis points. However, markets pulled back as Fed Chair Jerome Powell stressed a gradual path for easing. He described the cut as a “risk-management move” and dismissed calls for a larger 50-point cut, backed by President Donald Trump.

The S&P 500 and Nasdaq closed lower overnight. New Fed Governor Stephen Miran dissented, supporting a deeper cut.

Currency Market Volatility

The U.S. dollar initially dropped to its lowest level since February 2022 but rebounded 0.3% on Thursday. The euro fell 0.2% to $1.1795 after briefly touching its strongest level since June 2021.

The Chinese yuan edged up 0.1% after Beijing left short-term borrowing costs unchanged. Sterling weakened 0.2% to $1.3606 ahead of the Bank of England’s policy decision, with rates expected to remain at 4%.

Broader Policy Moves

Traders now price in an 87.7% chance of another Fed rate cut in October, up from 74.3% the day before. Analysts said markets may pause after recent strong rallies, with limited room for further gains.

Elsewhere, the Bank of Canada also cut rates by 25 basis points to 2.5%, its first move in six months, and signaled more easing if growth risks persist.

Growth Concerns in New Zealand and Australia

New Zealand’s S&P/NZX 50 dropped 0.8% after weaker-than-expected GDP data showed contraction in Q2. The kiwi dollar sank 0.9%.

In Australia, the ASX fell 0.7%. Gas producer Santos tumbled 13.6% after Abu Dhabi’s ADNOC scrapped its $18.7 billion takeover bid. The Australian dollar slipped 0.4% following soft labor market data, with employment falling despite a steady jobless rate of 4.2%.

Bonds, Commodities, and Oil

Bond markets strengthened, with the yield on 10-year U.S. Treasuries slipping to 4.064%. Gold retreated 0.2% to $3,653.64 an ounce after touching record highs earlier in the week. Oil prices also dipped, with Brent crude down 0.4% at $67.67 per barrel.