Stocks Climb to Record on Fed, Chip Industry Boom

Optimism in Asian equities is set to extend to Europe after the Federal Reserve signalled it remains on track for three interest-rate cuts this year.

Euro Stoxx 50 futures surged 1.2%, signalling that the underlying index may test its highest level since 2000. MSCI’s gauge for global shares reached an intra-day record, while that of Asian stocks climbed to a level last seen in April 2022. Contracts for US equities also advanced, Bloomberg reported.

The moves in Asia were powered by gains in tech firms listed in Hong Kong, Taiwan and South Korea following Micron Technology Inc.’s strong revenue forecast reflecting artificial intelligence-induced demand. Japan’s Nikkei 225 marked a fresh closing high after the nation’s exports grew for a third consecutive month.

“It’s a magnificent sea of green” in Asia, said Tony Sycamore, strategist at IG Australia. “There’s just a broad sense of relief that with the Fed out of the way for another six weeks, and with US yields seeming placated for now, it’s back to tech and the buzz around AI returning to the driver’s seat.”

Fed policymakers kept their outlook for three cuts in 2024 and moved toward slowing the pace of reducing their bond holdings, suggesting they aren’t alarmed by a recent rebound in price pressures. While Jerome Powell continued to highlight officials would like to see more evidence that prices are coming down, he also said it will be appropriate to start easing “at some point this year.”

Treasuries were steady in Asian trading after Wednesday’s advance on growing expectations for the Fed to cut rates as early as June. The dollar extended losses, with the yen strengthening for the first time in eight days.

Bank of Japan Governor Kazuo Ueda said policymakers saw the risk of potentially having to raise interest rates rapidly if it waited too long to end the massive easing program, a view that prompted the central bank to make that move on Tuesday.

The move in US equity futures comes after the S&P 500 climbed 0.9% to a fresh high. The tech-heavy Nasdaq 100 index, which is more sensitive to policy, rose 1.2% amid a rally in the Magnificent Seven group of mega-caps. US small-caps, which typically do well when the economy is expanding, also notched the best session in a month.

“The Fed appears to have achieved a better balance around its dual mandate of price stability and maximum employment,” Banco Bilbao Vizcaya Argentaria analysts wrote in a note. “This suggests that it will soon begin to normalize its policy stance, probably in June, although it will proceed cautiously even after that.”

European traders will shift focus to the Bank of England as it announces its monetary policy decision. The central bank likely to keep interest rates at a 16-year high, giving more time for inflationary pressures to cool before it loosens up on the quickest tightening cycle in decades.

Elsewhere, Japan Airlines Co. said it will purchase 42 new Boeing Co. and Airbus SE aircraft in a multibillion-dollar order to expand its international network. BMW AG said it expects a margin of 8-10% for its automotive segment this year and deliveries to increase slightly.

Gold rallied to trade over $2,200 an ounce for the first time following the Fed comments, while oil also rose. Bitcoin fluctuated after rallying over 5% on Wednesday.