Asian stock markets experienced a significant uptick, with Japan's Nikkei reaching new heights and gold prices soaring, following the U.S. Federal Reserve's announcement to proceed with interest rate cuts. This decision led to a modest decline in the U.S. dollar and heightened expectations for a rate reduction in June.
In early trading, the Nikkei surged by 1.5%, crossing the 40,000 mark, while the MSCI's broadest index of Asia-Pacific shares outside Japan climbed 1.6%. Concurrently, spot gold prices hit a record $2,222 an ounce, benefiting from the anticipated lower interest rates which tend to decrease bond yields.
The Federal Reserve maintained U.S. interest rates between 5.25% and 5.5%, aligning with predictions, and slightly raised its inflation forecasts. Despite higher recent inflation rates, the Fed's projection for three 25 basis point cuts this year remains unchanged from December, indicating a readiness to ease monetary policy.
U.S. Treasury yields saw a slight decrease in New York and remained stable in Asia, with two-year yields at 4.59% and ten-year yields at 4.26%. This financial environment contributed to the S&P 500 achieving a record closing high, with U.S. and European futures also on the rise during Asian trading.
The dollar experienced a downturn against major currencies, boosting the yen from near multi-decade lows to 150.45 per dollar. The euro reached a week high of $1.0939 in Asia, and the Australian dollar surged following a strong jobs report, dampening speculation of early policy easing.
Although gold prices slightly retreated from their peak, they remain significantly high at $2,200 an ounce, marking a 7% increase this year. Experts suggest that the anticipated U.S. rate cuts will continue to positively impact gold prices over the medium term.
Brent crude futures held steady, priced at $86.34 a barrel.
