By Rae Wee
SINGAPORE (Reuters) – Asia shares were hobbled by weakness in Chinese markets on Thursday and struggled to build on Wall Street’s rally, even as investor sentiment was lifted by the prospect that the Federal Reserve could still deliver two rate cuts this year.
The Fed on Wednesday left rates unchanged in a widely expected decision, but maintained its projection for two quarter-percentage-point rate cuts by the year-end.
Policymakers did revise up their inflation forecast for the year and marked down their outlook for economic growth, citing risks from U.S. President Donald Trump’s tariff policies.
Still, investors took comfort from the Fed’s “dot plot” of policy rate expectations and Chair Jerome Powell’s comments that tariff-driven inflation will be “transitory” and largely confined to this year, in turn sending stocks higher while U.S. Treasury yields and the dollar fell.
Australian shares jumped 1%, while U.S. futures also extended their rally after the cash session ended on a high.
Nasdaq futures ticked up 0.4% and S&P 500 futures advanced 0.3%. EUROSTOXX 50 futures similarly added 0.1%.
Trading was thinned with Japan markets closed for a holiday, though Nikkei futures edged up 0.2%.
“Reassurance perhaps, but the ongoing path the Fed will tread remains a tight one to navigate, and the central bank remains firmly at the mercy of the incoming data, surveys that can be wholly fickle and market forces that may well still go after a firm response,” said Chris Weston, head of research at Pepperstone.
Gold similarly scaled yet another record high of $3,055.96 an ounce, helped by the prospect of further Fed easing this year. [GOL/]
Trading of cash U.S. Treasuries was closed owing to the Japan holiday, though futures ticked higher, implying lower yields. Bond yields move inversely to prices. [US/]
That in turn undermined the dollar, which fell 0.27% against the yen to 148.25, while the euro steadied near a five-month high at $1.0908.
Sterling scaled a four-month top of $1.3015 early in the session, ahead of the Bank of England’s policy decision later on Thursday where it is similarly expected to keep rates on hold.
“We expect the (Monetary Policy Committee) members to signal the desire to see further disinflation as a reason to keep policy on hold this month. They will affirm that the policy direction remains towards further easing, but the timing will be data-dependent,” said analysts at ANZ.
CHINA DRAGS
However, the buoyant mood failed to drive a broader rally across Asia, with MSCI’s broadest index of Asia-Pacific shares outside Japan swinging between losses and gains to last trade a marginal 0.1% higher.
