Asian Shares Up on Rate Cut Expectations, Trade Deal Hopes

Shares in the Asia-Pacific region are trading higher across the board on Thursday, following Wall Streets lead, after the U.S. Federal Reserve left its benchmark interest rate unchanged, but hinted at future rate cuts.

On Wednesday, the Federal Open Market Committee (FOMC) voted 9 to 1 to keep the benchmark rate in a target range of 2.25% to 2.50%. The Fed also dropped the word “patient” in describing its approach to monetary policy. Central bankers also left the door open somewhat to future cuts. Finally, eight members favored one cut in 2019, while the same number voted in favor of the status quo, while one wanted a rate hike.

In the cash market at 05:40 GMT, Japan‘s Nikkei 225 Index is trading 21442.08, up 108.21 or +0.51%, Hong Kong’s Hang Seng Index is at 28435.96, up 233.82 or +0.83% and South Koreas KOSPI is at 2128.35, up 3.57 or +0.17%.

In Australia, S&P/ASX 200 is trading 6668.50, up 20.40 or +0.31% and Chinas Shanghai Index is at 2979.71, up 61.91 or +2.12%.

Powell Signals Future Rate Cut

After presenting a plethora of data and projections, Fed Chair Jerome Powell held a press conference. It was at this press conference that he opened the door to the possibility of a rate cut as soon as July. He said, “Many participants now see the case for somewhat more accommodative policy has strengthened.”

Powell further added, “Overall, our policy discussions focused on the appropriate response to the uncertain environment,” he said. “Many participants believe that some cut to the fed funds would be appropriate in the scenario they see as most likely.”

Shanghai Index Underpinned by Positive U.S.-China Trade News

Chinese investors turned a little more optimistic about a potential trade deal earlier this week after President Trump tweeted that he “had a very good telephone conversation with President Xi of China” and the two would have an “extended meeting” during the gathering.

Hopes of a trade deal grew after Chinese President Xi Jinping broke his silence on Tuesday with state media announcing he is willing to discuss trade issues with Trump at next weeks G-20 meeting in Osaka, Japan.

“Xi Jinping emphasized, on the issue of trade, that both sides should resolve the problem through fair dialogue; the important thing is to protect the rational concerns of both sides,” state news agency Xinhua reported, according to a CNBC translation of the Chinese-language article. “We also hope the U.S. will fairly treat Chinese enterprises.”

Nikkei Index Rises After Bank of Japan Holds Rates Steady

The Bank of Japan kept monetary policy in check on Thursday, holding interest rates at ultra-low levels while saying it preferred to save its weapons at this time rather than introduce additional stimulus. The BOJ also stressed that global risks were increasing as trade tensions and uncertainty over U.S. economic policies shock financial markets, signaling that it, too, is leaning toward ratcheting up, not reducing, monetary support.