Asian stocks rally after Fed rate cut, BOJ keeps policy steady

GLOBAL MARKETS-Asian stocks rally after Fed rate cut, BOJ keeps policy steady 

TOKYO (Reuters): Asian shares jumped on Thursday to a three-month high and the dollar fell broadly after the Federal Reserve cut interest rates as expected and US Treasury yields declined.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.68% to the highest since July 30. Hong Kong shares rose 1.16%, while Japan’s Nikkei stock index rose 0.2%.

US Treasury yields slipped in Asia after the rate cut, but Fed Chairman Jerome Powell signalled additional trims are unlikely because there are several areas of strength in the US economy.

The yen held onto gains versus the dollar after the Bank of Japan keep its ultra-easy monetary policy in place as expected and changed its forward guidance to more clearly signal the future chance of a rate cut.

Debate at the Fed and the BOJ highlights the struggle that many central banks are facing.

The US-China trade war and Britain’s divorce from the European Union have increased uncertainty, but central banks are somewhat reluctant to ease policy aggressively because interest rates are already very low in many major economies.

US stock futures edged 0.01% higher on Thursday in Asia after the S&P 500 rose 0.33% to close at a record high on Wednesday for the second time in three trading sessions.

A positive mood on Wall Street carried over to Asian equities, except for Australian shares, which fell 0.51% after weak earnings from Australia and New Zealand Banking Group.

The Fed lowered its policy rate to 1.50%-1.75%, but dropped a previous reference in its statement to “act as appropriate” to sustain the economic expansion.

In his news conference, Powell listed several reasons why he feels the economy is doing well, such as robust consumer spending, strengthening home sales, and healthy asset prices.

The yield on benchmark 10-year Treasury notes fell to 1.7785% in Asia on Thursday, while the two-year yield eased slightly to 1.6216%.

The dollar index against a basket of six major currencies fell 0.34% to 97.318, extending declines from Wednesday.

The greenback fell to 7.0420 yuan in onshore trade, the lowest since Aug. 19.

The yen rose 0.2% to 108.67 per dollar, holding onto gains after the BOJ left policy unchanged as expected.

In the energy market, oil futures erased loses and rose in Asia on Thursday after as a massive buildup in US crude stock piles triggered a decline in futures on Wednesday.

US crude erased loses and rose 0.22% to $ 55.18 a barrel. Brent crude rose 0.45% to $ 60.88 per barrel.