Asian markets have rallied following comments from Federal Reserve Chairman Jerome Powell, which suggested the bank may cut interest rates again this month. The comments overshadowed trade war fears, leading investors to jump back into the market and resume a months-long, tech-fuelled rally.
Powell’s remarks indicated a shift in focus towards jobs, citing a less dynamic labor market and rising downside risks to employment. He also hinted that monetary policymakers could soon stop reducing the size of their holdings of bonds and other instruments bought during the pandemic to keep borrowing rates low and support the economy.
The US Federal Reserve has a dual mandate from Congress to tackle both inflation and employment. While price gains continue to outpace the bank’s target pace, weak readings have forced Powell to prioritize jobs. Last month, the Fed announced its first rate cut since December, and Powell’s recent comments suggest more cuts are on the way.
US markets ended mostly down but well off their morning lows, while Asian markets were on the front foot. Hong Kong, Tokyo, Taipei, and Seoul all climbed more than one percent, with Shanghai also rising despite data showing Chinese consumer prices fell in September.
The latest trade salvos between Washington and Beijing had threatened to derail the market, with US President Donald Trump threatening 100-percent tariffs due to Chinese rare earth measures. However, Powell’s remarks helped investors shift focus away from the trade tensions. Trump has since tempered his rhetoric, stating that the US has a “fair relationship” with China and that the situation will be fine.
US Trade Representative Jamieson Greer also expressed optimism, stating that senior officials had spoken about the rare earth dispute and were working towards a resolution. The developments have eased trade war fears, allowing the market to rally.
Key figures at around 0230 GMT showed significant gains, with Tokyo’s Nikkei 225 up 1.3 percent and Hong Kong’s Hang Seng Index up 1.5 percent. The euro and pound also rose against the dollar, while West Texas Intermediate and Brent North Sea Crude remained flat.
The market rally indicates a shift in investor sentiment, with hopes that the trade row between the US and China can be defused. As the situation continues to unfold, investors will be watching for further developments and potential interest rate cuts from the Federal Reserve.