(Bloomberg) — Asian stocks were set to climb following a rally on Wall Street as Jerome Powell calmed tariff-wary investors, signaling the Federal Reserve saw no need for drastic action in the face of Donald Trump’s trade war.
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Australian shares rose along with US equity futures, after the S&P 500 climbed 1.1% Wednesday and the Nasdaq 100 gained 1.3%. Hong Kong contracts were little changed after a gauge of US-listed Chinese stocks declined 0.4% in a sign that China’s relative outperformance against US stocks this year may falter. Tokyo is closed for a public holiday.
Treasuries saw an abrupt reversal on Wednesday, with two-year yields sinking below 4% and the benchmark 10-year yield dropping four basis points to 4.24%. An index of the dollar climbed.
The Fed held monetary policy steady, as expected, and Powell was measured in his assessment of how the president’s actions might shape the economy. He cited the potential for the impact of tariffs on inflation to be “transitory.” The jump in stocks, the biggest for any Fed day since July, follows a bruising four-week stretch in which the S&P 500 slid into a correction.
“The market will read this as dovish at the margin, with the Fed not overtly concerned with the economy or inflation. Stocks and bonds rejoice,” said Christian Hoffmann at Thornburg Investment Management.
Stocks rallied despite changes to Fed forecasts that could be viewed as bearish for equities, among them a tamping down of growth expectations in 2025 and a higher estimate of inflation.
That’s because the correction in stocks already accounted for a significantly worse economic backdrop than existed when the Fed last met, according to Amanda Lynam, the head of macro credit research at BlackRock Financial Management.
“A lot of that was baked in,” Lynam said on Bloomberg Television. “We’ve had such a bruising few weeks in the equity market. Most forecasters have reflected lower growth and higher inflation, and that’s part of what’s driving us here.”
In Asia, data set for release includes 1-year and 5-year Loan Prime Rates in China, unemployment in Australia, inflation in Hong Kong and a rate decision in Taiwan. Later Thursday, the Bank of England is expected to leave interest rates unchanged while the Swiss National Bank is tipped to cut rates by 25 basis points to 0.25%, according to consensus forecasts.
