Nasdaq Futures Jump 2% as Big Fed Cut Spurs Rally: Markets Wrap

(Bloomberg) — Stocks rallied across the globe on expectations the Federal Reserve’s half-percentage-point interest-rate cut will protect the world’s largest economy from a downturn.

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US equity futures soared, with a 1.5% gain in S&P 500 contracts putting the underlying benchmark on course to test a record high in the cash market. Nasdaq 100 contracts jumped 2%, fueled by bets of resilient American growth and lower borrowing costs. Europe’s Stoxx 600 index gained as much as 1.1%.

“What we are seeing is the belief that the Fed has everything under control and they are going to engineer a soft landing and therefore risk assets are moving ahead strongly,” Jon Bell, a portfolio manager at Newton Investment Management, said on Bloomberg TV.

The dollar weakened, with an index of Asian currencies rising to the strongest level in more than a year. Treasuries steadied after falling on wagers the aggressive move to start the cutting cycle may mean less easing by the Fed in the long run. Bitcoin hit a three-week high.

Wednesday’s decision by the Fed has reinforced expectations that the US economy will escape a downturn. A survey of Bloomberg Terminal subscribers shows 75% expect the US to avoid a technical recession by the end of next year.

The Fed’s first reduction in more than four years was accompanied by projections indicating an additional 50 basis points of cuts across the remaining two policy meetings this year.

Fed Chair Jerome Powell said launching the unwind of the central bank’s historic tightening campaign with a big move while the US economy is still strong would help limit the chances of a downturn.

“The Fed is embarking on what I see as a series of rate cuts,” said Stephen Jen, the chief executive at Eurizon SLJ Capital. The size of the initial move “won’t make a big difference as equities should soon stabilize, bond yields will likely drift lower for good reasons — like disinflation and not a hard landing. The dollar should continue to weaken against a broad range of currencies,” he said.

Meanwhile, the Bank of England is likely to refrain from cutting rates for a second consecutive meeting on Thursday, maintaining a patient approach to reversing the most aggressive policy tightening in decades. Governor Andrew Bailey may provide investors more hints that the central bank will cut rates again in November.

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Norway’s krone gained after the central bank kept borrowing costs unchanged and signaled no intention to cut them before next year as it contends with inflation risks.

In Asia, a gauge of the region’s stocks rallied by the most in a week. The Hong Kong Monetary Authority lowered its base interest rate for the first time in four years following the Fed’s cut. HSBC Holdings Plc reduced its key benchmark rate in Hong Kong for the first time since 2019, a move likely to hit margins while bringing relief to homeowners and borrowers in the Asian financial hub.

Still on the monetary policy decision front, Bank of Japan Governor Kazuo Ueda faces the delicate task on Friday of making sure investors are firmly aware of rate hikes to come, without ruffling markets even as he stands pat on policy. The yen swung between gains and losses in volatile trading Thursday.

In metals, gold rose toward a record and copper climbed to its highest level since mid-July, spurred on by the Fed’s move. Oil advanced as the risk-on tone swept across wider markets, with traders monitoring escalating tensions in the Middle East.

Key events this week:

• UK rate decision, Thursday

• US Conf. Board leading index, initial jobless claims, existing home sales, Thursday

• FedEx earnings, Thursday

• Japan rate decision, Friday

• Eurozone consumer confidence, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 1.1% as of 10:13 a.m. London time

• S&P 500 futures rose 1.5%

• Nasdaq 100 futures rose 2%

• Futures on the Dow Jones Industrial Average rose 1.1%

• The MSCI Asia Pacific Index rose 1.3%

• The MSCI Emerging Markets Index rose 1%

Currencies

• The Bloomberg Dollar Spot Index fell 0.4%

• The euro rose 0.5% to $1.1171

• The Japanese yen fell 0.4% to 142.87 per dollar

• The offshore yuan rose 0.4% to 7.0640 per dollar

• The British pound rose 0.5% to $1.3280

Cryptocurrencies

• Bitcoin rose 3.1% to $62,106.53

• Ether rose 4.7% to $2,436.05

Bonds

• The yield on 10-year Treasuries was little changed at 3.70%

• Germany’s 10-year yield advanced one basis point to 2.20%

• Britain’s 10-year yield was little changed at 3.85%

Commodities

• Brent crude rose 1.1% to $74.46 a barrel

• Spot gold rose 1.1% to $2,585.84 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Winnie Hsu, Masahiro Hidaka, Anchalee Worrachate, Chiranjivi Chakraborty and Farah Elbahrawy.

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