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Equities across Asia traded mixed on Thursday after the United States Federal Reserve lowered interest rates for the first time since December, leaving investors uncertain about how many more cuts may follow. The move came as Fed Chairman Jerome Powell warned of growing weakness in the American labour market.
The Fed announced a 25-basis-point reduction after months of speculation driven by weak employment data. The decision, supported by 11 of 12 policymakers, saw Stephen Miran, an appointee of former President Donald Trump, push for a deeper 50-point cut. Despite inflation remaining well above the 2 per cent target, analysts noted that the focus of the central bank is now shifting to jobs.
In its statement, the Federal Reserve said “downside risks to employment have risen” even as inflation “remains somewhat elevated.” At a press briefing, Powell explained that labour demand had slowed, with job creation falling below the rate needed to maintain stable unemployment levels. He added that tariffs had so far passed through to consumers at a slower pace than expected.
The Fed’s closely watched outlook revealed divisions among officials. While a slim majority of 19 policymakers expect two more cuts this year, seven anticipate no further reductions. Powell declined to commit to a clear path, insisting that decisions will be made “meeting by meeting.”
Market analysts said the divide reflected uncertainty. Michael Pearce of Oxford Economics described the split as “unusual” and suggested the next policy move in October could depend heavily on fresh labour statistics. Economists at Bank of America said investors were disappointed Powell did not lean more firmly toward protecting jobs. They forecast one more rate cut in December but noted Powell’s comments have increased the chances of an additional cut in October.
Jack McIntyre of Brandywine Global, part of Franklin Templeton, said the Fed is placing greater weight on the slowing labour market. He explained that rate cuts may be necessary because monetary policy impacts with a lag, while jobs data are lagging indicators. “The weakening labour market will have a deleterious impact on inflation, so the Fed is willing to wait out sticky inflation,” McIntyre said.
US stocks closed mixed on Wednesday. The Dow Jones gained 0.6 per cent to finish at 46,018.32 points, while the S&P 500 and Nasdaq slipped. In commodities, gold prices held near $3,660 after touching a record $3,707 earlier in the week. Oil prices also eased, with West Texas Intermediate down 0.5 per cent at $63.73 per barrel, while Brent crude slipped 0.4 per cent to $67.66.
Asian markets opened cautiously on Thursday. Tokyo’s Nikkei 225 rose 1.1 per cent to 45,277.43 points as a stronger dollar supported exporters. Hong Kong’s Hang Seng Index dipped 0.4 per cent to 26,813.58, while Shanghai’s Composite Index inched up 0.2 per cent to 3,882.18. Seoul, Taipei and Jakarta also recorded gains, but Sydney, Singapore, Wellington and Manila posted losses.
In the currency market, the euro edged up against the dollar at $1.1816, while the pound slipped slightly to $1.3622. The dollar strengthened against the yen, trading at 147.04 yen. The euro rose against the pound to 86.74 pence.
In company news, Australian energy group Santos slumped nearly 12 per cent in Sydney after a consortium led by the state-owned Abu Dhabi National Oil Company withdrew its takeover bid.
Analysts say the mixed performance in Asian equities highlights investor caution as global markets await clearer signals from the Fed. With the central bank divided on its next moves, traders are bracing for potential volatility through the rest of the year.
