Asia report: Markets buoyed by outsized Fed rate cut

Asia-Pacific markets saw notable gains on Thursday as investors responded to the US Federal Reserve's decision to cut interest rates by an outsized half-percentage point overnight.

The move spurred optimism across the region, despite mixed economic data and divergent performances in different markets.

“In response to the US Federal Reserve's decision to rapidly cut interest rates by half a percentage point for the first time in over four years, Asian stock markets are mostly up on Thursday despite Wall Street [coming] off its best levels into the close,” said Patrick Munnelly at TickMill.

“Thursday's significant increase in the Japanese market is a continuation of yesterday's advances.

“Index heavyweights, financial and technology firms are leading the advances across most sectors, as the Nikkei 225 is just above the 37,000 handle.”

Munnelly noted that real estate developers and spirits manufacturers led the rebound in China equities from modest early losses on Thursday, as investors anticipated that the start of long-awaited US rate cuts would provide Beijing policymakers with additional flexibility to stimulate the faltering Chinese economy.

“Through the overnight discount window, the Hong Kong Monetary Authority reduced its base rate by 50 basis points to 5.25%.

“The monetary policy of Hong Kong is in strict accordance with that of the United States, as the city's currency is pegged to the dollar at a rate of HKD 7.75 to HKD 7.85 per dollar.”

Markets buoyed by Fed rate cut to rise across the region

In Japan, the Nikkei 225 surged by 2.13% to close at 37,155.33, while the Topix index gained 2.01%, ending at 2,616.87.

Major contributors to the rise on Tokyo’s benchmark included Mercari, which climbed 6.51%, and Fujikura, up by 6.36%.

Hong Kong's Hang Seng Index also rose sharply, gaining 2% to finish at 18,013.16, with key performers including China Resources Land, which saw a 7.77% jump, and Haier Smart Home, up by 7.69%.

Mainland Chinese stocks experienced more modest gains, with the Shanghai Composite advancing 0.69% to 2,736.02, and the Shenzhen Component rising 1.19% to 8,087.60.

Strong performances from companies like Great-Sun Foods and Chongqing Road & Bridge Co, both of which soared over 10%, supported Shanghai’s gains.

In contrast, South Korea’s Kospi 100 fell by 0.25% to 2,583.45, dragged down by sharp declines in semiconductor companies as traders returned from the extended Chuseok holiday.

SK Hynix dropped 6.14%, while SK Square and KT&G Corporation fell by 5.58% and 4.3%, respectively, as the tech sector continued to face headwinds.

Australia's S&P/ASX 200 recorded a 0.61% increase to close at 8,191.90.

The market in Sydney was lifted by a strong performance from Sims, which surged 12.42%, and ZIP Co, up 9.24%.

New Zealand's S&P/NZX 50 rose by 0.62% to 12,665.00, with gains led by Pacific Edge and Fletcher Building, which increased by 6.54% and 4.64%, respectively.

In currency markets, the dollar was last up 0.34% on the yen to trade at JPY 142.77, while it weakened 1.06% against the Aussie to AUD 1.4626, and retreated 0.92% from its Kiwi counterpart, changing hands at NZD 1.5956.

Oil prices edged higher, with Brent crude futures last up 1.3% on ICE at $74.61 per barrel, and the NYMEX quote for West Texas Intermediate gaining 1.03% to reach $71.64.

NZ economy contracts less than expected, Australia unemployment unchanged

On the data front, New Zealand’s economy contracted slightly in the second quarter, with GDP declining by 0.2% compared to the previous quarter, according to fresh official data.

The contraction was smaller than the 0.4% decline anticipated by analysts polled by Reuters, however.

Across the Tasman Sea, Australia’s unemployment rate remained unchanged at 4.2% in August, as reported by the Australian Bureau of Statistics.

That was in line with market expectations, although employment figures were stronger than forecasted, with 47,500 new jobs added, surpassing estimates of 25,000.

Meanwhile, the Bank of Japan kicked off a two-day policy meeting, with a critical rate decision expected on Friday.

It comes after the central bank shifted away from its decades-long policy of ultra-low interest rates earlier in the year.

In the United States, the Federal Reserve cut its benchmark interest rate by half a percentage point overnight, setting its target range at 4.75% to 5%.

The decision prompted a corresponding move by the Hong Kong Monetary Authority, which lowered its rate by 50 basis points to 5.25%.

That adjustment reflects Hong Kong’s need to maintain its currency peg to the dollar.

Reporting by Josh White for Sharecast.com.