Asian stocks: Asian equities advance as Fed calms tariff nerves

Australian and South Korean shares gained with US futures after the S&P 500 climbed 1.1% and the Nasdaq 100 rose 1.3%. Hong Kong contracts were little changed following a drop in US-listed Chinese stocks in a sign China’s outperformance against US equities this year may be faltering. Japanese markets are shut for a holiday, meaning there’s no trading of cash Treasuries in Asia.

The Fed kept interest rates on hold Wednesday, as economists expected, and Chair Jerome Powell was measured in his assessment of how the President Donald Trump’s actions might shape the economy. Powell cited the potential for the impact of tariffs on inflation to be “transitory.” The jump in stocks, the biggest for any Fed day since July, followed a bruising four-week stretch in which the S&P 500 slid into a correction.

Treasuries saw an abrupt reversal on Wednesday, with two-year yields sinking below 4% and the benchmark 10-year yield dropping four basis points to 4.24%. An index of the dollar climbed.

“The market will read this as dovish at the margin, with the Fed not overtly concerned with the economy or inflation. Stocks and bonds rejoice,” said Christian Hoffmann at Thornburg Investment Management.

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US stocks rallied despite changes to Fed forecasts that could be viewed as bearish for equities, among them a tamping down of growth expectations in 2025 and a higher estimate of inflation. That’s because the correction in stocks already accounted for a significantly worse economic backdrop than existed when the Fed last met, according to Amanda Lynam, the head of macro credit research at BlackRock Financial Management.In Asia, data set for release includes one-year and five-year loan prime rates in China, unemployment in Australia, inflation in Hong Kong and a rate decision in Taiwan. Later Thursday, the Bank of England is forecast to leave interest rates unchanged while the Swiss National Bank is tipped to cut rates by 25 basis points, according to consensus forecasts.

Elsewhere, Tencent Holdings Ltd. outlined plans to boost spending on AI infrastructure after posting its fastest pace of revenue growth since 2023. In South Korea, Samsung Electronics Co. pledged to strengthen its position in the high-bandwidth memory chip market in response to shareholder criticism.

Fed Decision

Powell’s calibrated tone on recession risk – stating it was “not high” – soothed nerves among stock investors. The central bank’s move to trim growth assessments also added fuel to the bond rally, with traders and the Fed now aligned on the rate-cut outlook this year.

“Powell came in and gave a pretty dovish performance in the sense of, ‘We got this, we’re in a good place, we can afford to wait, we’ll see how it goes, we’re gonna get the job done’,” said Bill Dudley, the former president of the New York Fed, on Bloomberg Television. “He was pretty reassuring to people that this was all quite manageable.”

The Fed also said it will start shrinking its balance sheet at a slower pace starting next month, reducing the amount of bond holdings it lets roll off every month.

Oil prices rose Wednesday after a US government report allayed concerns about near-term demand destruction. Gold touched a new high as the Fed projected slower growth and higher inflation.