Asian markets struggle to maintain momentum after Fed rate cut

HONG KONG: A rally in Asian markets stalled on Friday (November 8) after early gains as traders struggled to hold on to another Wall Street record after Fed interest rate cutwhile they also weighed prospects with another Trump administration.

Traders were also awaiting the end of a week-long meeting of key Chinese officials who were crafting a major stimulus package for the world’s No. 2 economy with an eye on the U.S. election results.

While there are concerns that four more years of Donald Trump could lead to increased tensions between Beijing and Washington, investors are optimistic that his plans to cut taxes and push further deregulation will boost corporate profits.

There are concerns that Republican policies could reignite inflation, dealing a blow to the Fed’s long-standing fight against prices.

But central bank Governor Jerome Powell added to the optimism on Thursday, saying the results of this week’s vote would have no impact on policymakers’ decision-making, adding that they would make their decisions based on data.

After the policy council cut rates by 25 basis points to 4.50 to 4.75 percent, as expected after a 50-point cut in September, Powell said, “We’re not guessing, speculating, or guessing.”

The Fed’s post-meeting statement said that “labor market conditions have generally improved” since the start of the year and noted progress in reducing inflation to its two percent target.

Traders are now trying to figure out the prospects for a new decline in December.

“With Powell focused on labor, the combination of inflation now within the Fed’s target means he can easily justify further cuts,” said Robert Tipp and Tom Porcelli of PGIM Fixed Income.

“While there is a lot of uncertainty, the Fed’s end-2025 forecast for the Fed Funds Rate of 3.5% is still a useful starting point for determining where this cycle is headed.”

On Wall Street, the S&P 500 and Nasdaq rose again to set new records, helped by strong performances from tech giants Apple, Google parent Alphabet and Meta Facebook.

Asia took the lead in early trading, but some markets fell in the afternoon.

Tokyo, Sydney, Singapore, Wellington, Taipei and Jakarta grew.

But Hong Kong and Shanghai turned negative, along with Seoul, Manila, Mumbai and Bangkok.

In currency markets, the dollar fell against the yen, extending Thursday’s losses in response to the Fed’s rate cut, while Bitcoin hit another record high of over 76,956 on hopes of more support from the cryptocurrency-friendly Trump White House.