(Bloomberg) — Asian equities climbed Friday after stocks, bonds and commodities all rallied in the US as the Federal Reserve cut interest rates.
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Australian and Japanese shares advanced along with Hong Kong futures, while the Golden Dragon index of US-listed Chinese companies jumped 3.5%. The S&P 500 gained 0.7% and the Nasdaq 100 climbed 1.5%, both setting fresh peaks for a second day. An index of global equities also advanced to a record. Treasuries ticked lower early Friday after rallying in the US session.
Investors are shifting focus from the Fed to China and the prospect of new stimulus measures Friday. While Trump’s victory has stirred up tariff threats for China and other developing economies, optimism is high that the authorities will announce measures to offset the impact of potential US trade levies.
Such measures may include support for local government debt and consumer spending, according to Michelle Lam, greater China economist for Societe Generale. Any new policies must be balanced against the prospect of potential tariffs, she said, noting that the 60% levies mooted by Trump may fail to emerge.
“We have so much uncertainty coming from the US tariffs,” Lam said. “We might see some smaller increase in tariffs of around 15% to 20% and that is more reasonable” for the Chinese economy to absorb, she said.
Thursday’s cross-asset rally was helped along by comments from Fed Chair Jerome Powell who pointed to the strength of the US economy and said he doesn’t rule “out or in” a December rate cut. Powell added the election will have no effect on policy in the near term, and said he would not step aside if asked by Trump.
“Powell & Co. reminded investors about the solid economic footing the US continues to stand on,” said Bret Kenwell at eToro. “Powell would not tip his hand on whether the Fed would likely cut rates in December, which shouldn’t surprise investors. However, the Fed appears more comfortable with the labor market and the current US economic backdrop than they did a few months ago.”
Bloomberg’s dollar index was little changed in Asia after sliding 0.8% Thursday, its worst day since August, as the greenback trimmed its post election gains. The yen drifted lower Friday after rallying 1.1% the day before to largely erase its declines against the dollar this week.
Local Chinese banks are joining more higher-yielding offshore loans of mainland firms as rates fall at home amid monetary easing measures.
