Stocks and Bonds Rise as the Federal Reserve Cuts Rates: Markets Close

(Bloomberg) — Asian shares were set to rise on Friday after a cross-asset rally in the U.S. lifted stocks, bonds and commodities as the Federal Reserve cut interest rates.

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Australian shares and stock futures for Japan and Hong Kong all rose, while the Golden Dragon index of US-listed Chinese companies rose 3.5%. The S&P 500 gained 0.7% and the Nasdaq 100 climbed 1.5%, both setting new highs for a second day. An index of global shares also reached a record.

Treasuries rose sharply on Thursday, offsetting declines from the day before when the Fed cut rates by 25 basis points, as expected. Ten-year yields fell 11 basis points, a sign that investors may be recalibrating initial fears about inflation under Donald Trump’s administration. Australian and New Zealand yields fell early, following government bond yields.

The moves between asset classes were helped by comments from Jerome Powell, who pointed to the strength of the US economy and said he would not rule out a rate cut in December. The Fed chairman added that the elections will have no effect on policy in the short term. Powell also said he would not step aside if Trump asks.

“Powell & Co. reminded investors of the solid economic foundation the US still stands on,” said Bret Kenwell of eToro. “Powell would not say whether the Fed is likely to cut rates in December, which should not surprise investors. However, the Fed appears to be more comfortable with the labor market and current economic environment in the US than it was a few months ago.”

An index of dollar strength had its worst day since August, as the greenback weakened against major currencies. The yen was steady after a comeback on Thursday, rising 1.1% to largely erase this week’s decline against the dollar.

Investors will now turn their attention to China on Friday as a legislative session comes to an end that could lead to new stimulus measures. While Trump’s victory has fueled tariff threats against China and other developing economies, hopes are high that China will announce measures to offset the impact of potential US trade tariffs.

Elsewhere, Japanese automaker Nissan Motor Co. Laying off 9,000 workers and cutting a fifth of its production capacity after net profit plunged 94% in the first half of the year.

Fed officials unanimously lowered the federal funds rate and updated language to note that “labor market conditions have generally eased,” and reiterated “the unemployment rate has increased but remains low.” The statement removed reference to “further” inflation progress, noting that inflation “has made progress toward the commission’s 2% target, but remains somewhat elevated.”

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