Global Stocks, Commodity Prices Rise After Fed Cuts Rates

By Adam Whittaker

Stock indexes in Europe followed Asia higher, and commodities rose after the U.S. Federal Reserve lowered interest rates by a half-percentage point, a larger amount than most analysts anticipated.

Markets across asset classes reacted to the Fed's first rate cut since 2020, which sent the benchmark federal-funds rate to a range between 4.75% and 5%. The move marked a pivot away from taming the high inflation that characterized the post-pandemic economy toward supporting economic growth and the labor market.

The Stoxx Europe 600 index rose 1.2%. Among national indexes, the U.K.'s FTSE 100 was up 1.1%, Germany's DAX climbed 1.4% and France's CAC 40 rose 1.9%.

In Asia-Pacific, stocks rose across the board. Japan's Nikkei 225 closed 2.1% higher, Hong Kong's Hang Seng rose 2%, and China's benchmark Shanghai Composite gained 0.7%. Australia's S&P/ASX 200 finished 0.6% higher, closing at a record for a fourth straight day.

The rate cut should drive economic growth and lead to rising equity prices, especially small caps, said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

U.S. stock futures also rallied following the Fed's rate cut, with futures for the S&P 500 up 1.45% and for the Dow Jones Industrial Average 1.1% higher.

Meanwhile, oil prices are edging higher, but market concerns over the global demand outlook linger. The boost to the U.S. economy was not enough to ease investor worries about rising tensions in the Middle East after Iran-backed Hezbollah was hit by another wave of exploding devices that many believe was orchestrated by Israel.

Gold, copper and aluminium prices edged higher in early trading.

In foreign exchange markets, the DXY dollar index recovered Thursday after falling to a near 14-month low on Wednesday in reaction to the rate cut.

The dollar's recovery is "probably because the move did not come out of the blue after recent adjustments in market rate-cut expectations and because [Fed Chair] Powell made it clear that the 50 basis-point easing did not represent the new pace," Unicredit Research analysts said in a note.

Eurozone government bond yields also traded up, while the gap between short- and long-dated U.S. Treasury bond yields widened, driven by long-dated yields rising faster than short-dated ones.

--Giulia Petroni, Emese Bartha and Renae Dyer contributed to this article.

Write to Adam Whittaker at adam.whittaker@wsj.com

(END) Dow Jones Newswires

September 19, 2024 06:08 ET (10:08 GMT)

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