Dec 19 2024: Asian stocks declined on Thursday as the Federal Reserve indicated a more cautious approach to rate cuts in 2025, while the yen weakened after the Bank of Japan (BOJ) kept rates steady.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.6%, following Wall Street’s downturn, where the Dow Jones Industrial Average dropped over 1,000 points on Wednesday. Taiwan’s tech-heavy market shed 1.2%, and Australian shares slid by nearly 2%.
The Federal Reserve cut interest rates as anticipated but revised its outlook, now projecting only two rate cuts in 2025, half of what was expected in September. Fed Chair Jerome Powell emphasized the need for caution moving forward, unsettling global markets.
The U.S. dollar index climbed to a two-year high, supported by the Fed’s “higher-for-longer” stance on interest rates. Benchmark U.S. 10-year Treasury yields reached a seven-month high at 4.524%.
In Japan, the yen reached a one-month low of 155.48 per dollar after the BOJ maintained its policy stance. Governor Kazuo Ueda’s upcoming press conference will be closely watched for insights on potential rate hikes in 2025, especially after board member Naoki Tamura’s dissenting vote for a rate increase.
Meanwhile, European markets are expected to open lower, with Eurostoxx 50 futures down 1.5%, German DAX futures 1.2% lower, and FTSE futures sliding 1%.
Elsewhere, Bitcoin briefly dipped below $100,000 after Powell stated the Fed had no plans to support Bitcoin stockpiling. Gold prices rose 0.8% to $2,609 per ounce, while oil prices softened due to demand concerns. Sterling remained steady at $1.25835 ahead of the Bank of England’s rate decision, where no change is expected despite economic headwinds.
The Fed’s cautious approach and Powell’s emphasis on inflation risks have added uncertainty to global markets, with analysts highlighting potential inflationary pressures from incoming U.S. policies under President-elect Donald Trump.