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Investors assess Fed outlook and Asia shares rise in line with Wall Street

Investors assess Fed outlook and Asia shares rise in line with Wall Street

Asia shares rose on Thursday, following a Wall Street rally. Investor sentiment was lifted as the prospect of two Federal Reserve rate cuts in this year boosted investor confidence. However, gains were limited due to a decline in Chinese stocks.

The Fed on Wednesday left rates unchanged in a widely expected decision, but maintained its projection for two quarter-percentage-point rate cuts by the year-end.

The policymakers revised up their inflation outlook for the year, and downgraded their economic growth forecasts. They cited risks from U.S. president Donald Trump's policies on tariffs.

Investors took solace in the "dot plot", which shows the Fed's expectations for policy rates, and Jerome Powell's remarks that the tariff-driven inflation will be "transitory" this year and mostly. This sent stocks up, while U.S. Treasury Yields and the Dollar fell.

Australian shares rose 1% while U.S. Futures extended their rally as the cash session ended with a high.

Nasdaq Futures rose 0.62%, while S&P 500 Futures grew 0.46%.

The EuroStoxx 50 futures were down 0.07%, and the FTSE Futures were down 0.15%.

Japan's markets were closed on holiday and trading was light. Nikkei futures rose 0.3%.

Kerry Craig, global strategist at J.P. Morgan Asset Management said that the Fed's easing policy remained unchanged and it would continue assessing downbeat consumer surveys in comparison to robust data from previous years, such as a resilient labor market.

He said that the Fed does not have all of the answers, but it faces many questions regarding its interpretations and impacts on the U.S. economic environment. "For the moment, the market appears reassured that Fed is prepared to act when needed."

Gold reached a new record high of $3.057.21 per ounce. This was aided by the prospect of more Fed easing in this year.

Due to the Japan holiday trading of U.S. Treasury cash bonds was closed. Futures, however, ticked up, suggesting lower yields. Bond yields are inversely related to bond prices.

The dollar fell by 0.18% to 148.40 yen, and the euro was close to its five-month high of $1.0893.

The sterling reached a high of $1.3015, a level not seen in four months, early on, before the Bank of England policy announcement later that day, when it is expected to maintain rates at the same level.

We expect (Monetary Policy Committee members) to indicate their desire for further disinflation to justify keeping policy on hold in this month. Analysts at ANZ said that they will confirm the policy direction will remain towards further easing but the timing of the decision will depend on the data.

CHINA DRAGS

The positive mood in Asia failed to fuel a wider rally, with MSCI’s broadest Asia-Pacific share index outside Japan only up by a tiny 0.2%.

This was due to the slide in Chinese stocks, with benchmark indices in mainland China (including Hong Kong) and Hong Kong dropping shortly after opening before recouping some of these losses.

Last week, the blue-chip CSI300 index fell by 0.63% while the Shanghai Composite Index slipped 0.3%. Hong Kong's Hang Seng Index dropped by about 1.5%.

"There's a possibility that this is just profit-taking after a huge rally." Gary Ng is a senior Natixis economist. He said that the market has already priced in all of the good news about DeepSeek, stimulus and other positive developments. Now, it's time to see real economic improvements and corporate profits.

On Thursday, Beijing's benchmark lending rates remained unchanged for the fifth consecutive month, in line with market expectations.

On the domestic market, the yuan fell 0.06%, to $7.2354 per US dollar, due to the wide yield differential between China and the United States. The offshore counterpart dropped 0.1% to $7.2383 per USD.

Data from Australia showed that employment fell unexpectedly in February, ending a long run of impressive increases, but the unemployment rate remained low.

The Aussie dropped in response to weaker than expected employment data and traded at $0.6337, 0.32% lower.

Data released on Thursday also showed that New Zealand's fourth-quarter economy grew faster and more than expected, pulling the country out of recession. The New Zealand dollar fell by 0.53%, to $0.5786, despite the positive news.

Oil prices rose in commodities due to an increase in tensions in the Middle East.

Brent crude futures increased 0.54%, to $71.16 per barrel. U.S. West Texas Intermediate (WTI), gained 0.54%, to $67.52 a barrel. (Reporting and editing by Shri Navaratnam, Jamie Freed and Rae Wee)

(source: Reuters)