(Bloomberg) — Share futures rallied alongside Asian equities on expectations the Federal Reserve’s half-percentage-point interest-rate cut will guide the world’s largest economy toward a so-called soft landing.
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European and US stock futures advanced, while Japan’s markets led gains in Asia. An MSCI gauge of regional equities climbed by the most in a week as most Asian benchmarks were in the green on Thursday, fueled by bets of a resilient US economy and lower borrowing costs.
Treasuries fell on bets the aggressive move to start the cutting cycle will mean the Fed will need to lower interest rates less in the long run. Chair Jerome Powell himself cautioned against assuming big cuts would continue and signaled borrowing costs may need to remain higher than pre-pandemic norms.
The Fed’s move is reinforcing expectations that the US economy will avoid a downturn, and cemented wagers that policymakers won’t be in a rush to deliver further easing — a stance that’s likely to underpin the dollar in the coming days. An overwhelming majority in a survey of Bloomberg Terminal subscribers expect a soft landing for the world’s largest economy, with 75% forecasting that it will avoid a technical recession by the end of next year.
“The Fed’s jumbo rate cut shows a clear intention of the Fed to support the US economy and aim for a ‘soft landing,’” Nomura Holdings Inc. strategists including Chetan Seth wrote in a note. “So long as the US manages to avoid a recession in the months ahead, the Fed pre-emptively cutting rates should be generally supportive of stocks.”
The Fed’s first reduction in more than four years was accompanied by projections indicating an additional 50 basis points of cuts across the remaining two policy meetings this year. Powell said launching the unwind of the central bank’s historic tightening campaign with a big move while the US economy is still strong would help limit the chances of a downturn.
Meanwhile, the Bank of England is likely to refrain from cutting rates for a second consecutive meeting on…
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