U.S. index futures rose in premarket trading on Thursday after the Federal Reserve unexpectedly cut interest rates by half a percentage point.
At 5:31 AM ET, Dow Jones futures (DOWI:DJI) climbed 466 points, or 1.11%. S&P 500 futures gained 1.48%, and Nasdaq-100 futures advanced 1.96%. The 10-year Treasury yield stood at 3.698%.
Today’s U.S. economic calendar highlights initial jobless claims for the week of September 14 at 8:30 AM ET, with expectations of 230,000, matching the previous figure. The Philadelphia Fed manufacturing index for September is forecast to improve to 2.7, after -7.0 the prior month. At 10:00 AM, existing home sales for August will be released, with a projection of 3.88 million units, slightly below July’s 3.95 million. Additionally, a 0.4% drop in leading economic indicators for August is expected.
In commodities, oil prices rose after the Federal Reserve’s 0.5% rate cut, but global demand concerns capped gains. China’s economic slowdown and signs of a weaker U.S. labor market continue to weigh on prices, with analysts forecasting softness in 2025.
West Texas Intermediate crude for October rose 1.03%, to $71.64 per barrel, while November Brent gained 1.21%, to $74.54 per barrel.
Copper (CCOM:COPPER) hit its highest price since July, driven by the Federal Reserve’s rate cut aimed at supporting U.S. growth. The metal rose 2.35%, with zinc and aluminum (CCOM:ALUMINUM) also posting gains. Despite the increase, weak Chinese demand continues to affect outlooks. Analysts believe the rate cut may benefit metals sensitive to economic activity. Copper inventories in China are returning to normal levels, signaling a mild market recovery.
Wheat prices fell due to weak demand in Europe and improved weather conditions in the U.S., overshadowing the Federal Reserve’s rate cut. This reflects expectations of further rate cuts, though the downtrend may be temporary. Analysts expect long-term wheat price increases, driven by reduced global supply and droughts in Russia and Ukraine.
Asia-Pacific markets closed positively, reacting favorably to the Federal Reserve’s rate cut, with many Asian assets appreciating in response. Japan’s Nikkei 225 rose 2.13% to 37,155.33. Hong Kong’s Hang Seng climbed 2.17% in final trading, while China’s CSI 300 gained 0.8%. Taiwan’s Weighted Index rose 1.68%. South Korea’s Kospi closed up 0.21%, and Australia’s S&P/ASX 200 hit a new record, rising 0.61%.
Following the Fed’s move, the Hong Kong Monetary Authority reduced interest rates by 50 basis points, reaching 5.25% due to the local currency’s peg to the U.S. dollar. In New Zealand, Q2 GDP fell by 0.2%, beating the forecast of a 0.4% decline. Taiwan’s central bank is expected to announce a crucial rate decision and update its economic forecasts on Thursday.
Traders are also monitoring the Bank of Japan’s (BOJ) statements on potential rate adjustments, which could impact the volatility of Japanese stocks and the yen. After the yen’s recent weakening, many investors fear a shift in monetary policy could trigger market uncertainties.
Governor Kazuo Ueda’s comments are critical, especially after the unexpected rate hike in July, which already rattled the market. The likelihood of a BOJ rate hike is around 30%, with December being the most probable month for action.
Additionally, Japanese stocks may become more volatile after the Tokyo Stock Exchange extends its trading hours by 30 minutes in November. While the change aims to boost trading volumes, some investors fear liquidity may decline, increasing volatility. South Korea’s experience suggests longer hours don’t guarantee higher volumes.
China is expected to cut key interest rates, according to a Reuters survey, following the Federal Reserve’s move, which eased risks for the yuan. The People’s Bank of China is expected to loosen its monetary policy, especially with weak economic data and the need to stimulate growth.
In Australia, August employment exceeded expectations, with a rise of 47,500 jobs, though the unemployment rate held steady at 4.2%. The data suggests that rate cuts from the Reserve Bank of Australia are unlikely in the near term as the labor market remains strong.
European markets posted significant gains, with all sectors rising except utilities. Norway’s central bank held interest rates at 4.5%, the highest level in 16 years, and announced plans to start cutting borrowing costs early next year.
Following the Federal Reserve’s rate cut, attention now turns to the Bank of England (BoE), which is expected to hold rates at 5.0% on Thursday amid high services inflation. The BoE is also expected to address plans to reduce its gilt balance by £100 billion ($132 billion) next year.
On Wednesday, U.S. stocks experienced high volatility after the Federal Reserve cut rates by 0.5%, marking the first reduction in four years. Despite setting new intraday records, major indexes closed lower. The Dow Jones fell 0.25%, the S&P 500 dropped 0.29%, and the Nasdaq closed down 0.31%. The Fed lowered rates to a 4.75%-5.00% range, with projections for further cuts through 2025. Volatility is expected to persist, but the market is forecast to reach new highs by year-end.
Before Thursday’s opening, Darden Restaurants (NYSE:DRI), FactSet (NYSE:FDS), Endava (NYSE:DAVA), Cracker Barrel (NASDAQ:CBRL) and MoneyHero (NASDAQ:MNY) will report their quarterly results.
After the close, FedEx (NYSE:FDX), Lennar (NYSE:LEN), MillerKnoll (NASDAQ:MLKN), Research Solutions (NASDAQ:RSSS), LightPath (NASDAQ:LPTH) and iPower (NASDAQ:IPW) will release their earnings.