Fed Rate Cut Sparks Mixed Market Reactions: What It Means for Your Investments and Business Growth
SINGAPORE — Global stock markets showed volatility on Thursday following the Federal Reserve’s first interest rate cut of the year, accompanied by a cautious outlook on further easing. This left investors uncertain about the future direction of monetary policy.
In Asia, markets were mixed. The Australian and New Zealand stock exchanges contributed to a 0.3% decline in the regional benchmark, while Chinese shares experienced fluctuations. U.S. equity futures rebounded by 0.4% after earlier losses, and stocks in South Korea, Taiwan, and Japan rose more than 1%.
Despite the Fed’s quarter-point rate cut leading to record highs earlier, global equities retreated on Wednesday. Fed Chair Jerome Powell described the reduction as a “risk-management” move, emphasizing that there is no urgency for additional cuts.
“Resuming a rate cut cycle at this stage is fraught with risks,” said Taimur Baig, chief economist at DBS. He added that Powell acknowledged the current policy path is uncertain.
U.S. stocks closed lower Thursday, with only newly appointed Fed Governor Stephen Miran dissenting in favor of a larger 50-basis-point reduction.
Currency markets reflected this uncertainty. The U.S. dollar hit its lowest level since February 2022 before bouncing back by 0.3%. The euro declined 0.2% to $1.1795 after briefly reaching a high not seen since June 2021. Meanwhile, the Chinese yuan increased slightly by 0.1% following China’s central bank decision to maintain its short-term lending rate, choosing not to follow the Fed’s rate cut. Sterling slipped 0.2% to $1.3606 ahead of the Bank of England’s policy announcement, where interest rates are expected to remain steady at 4%.
Investors now assign an 87.7% probability of another 25-basis-point Fed rate cut at the October meeting, up from 74.3% the previous day.
“The Fed is still signaling more rate cuts but also expects reasonable growth — a positive mix for equities,” noted Shane Oliver, chief economist at AMP. “However, gains may be limited after recent market rallies.”
Elsewhere, the Bank of Canada reduced its rates by 25 basis points to 2.5%, marking its first cut in six months.
In New Zealand, stocks fell 0.8% following a larger-than-anticipated economic contraction in the second quarter, with the kiwi dollar dropping 0.9% against the U.S. dollar. Australia’s market dipped 0.7%, pressured by a 13.6% plunge in Santos shares after an $18.7 billion takeover bid fell through. The Australian dollar declined 0.4% amid weaker labor market data.
Bond yields eased, with the U.S. 10-year Treasury yield falling to 4.064%. Gold prices slipped 0.2% to $1,653.64 an ounce, while Brent crude decreased 0.4% to $67.67 per barrel. — Reuters
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The Fed’s cautious rate cut and signals of limited further easing create both opportunities and risks for Omani businesses: cheaper global borrowing costs may spur investment, but lingering uncertainty necessitates cautious financial planning. Smart investors should monitor global interest rate trends closely to time market entry and hedge against potential volatility, while entrepreneurs could capitalize on stable growth signals by expanding strategically in export and trade sectors linked to the US and Asia.
