New york: Global markets turned green but remained mixed after the Fed cut its policy rate by 25 basis points, in line with estimates, while investors awaited the European Central Bank (ECB) rate decision on Thursday.
According to Anadolu Agency, the Fed lowered its interest rate to a range of 3.75 to 4% on Wednesday, citing increasing economic activity, slowing employment growth, and rising inflation amid high uncertainty over the economic outlook. The central bank announced it will end balance sheet reduction as of Dec. 1, a move expected to impact markets, especially bonds, in the coming period. The Fed's expansionary policies in 2020-21 provided liquidity to the financial system via large-scale bond purchases but also contributed to increased inflation.
The decision to end the balance sheet reduction is seen as a response to the recent liquidity crunch in the banking system and rising stress in the repo market. Analysts suggest this could ease liquidity pressure in the US financial system and support estimates of a softening influence on the dollar. Fed Chair Jerome Powell noted that a rate cut at the December meeting is uncertain due to ongoing economic uncertainty, adding that activity will remain under pressure as long as the federal government shutdown continues.
In a significant diplomatic meeting, US President Donald Trump and Chinese President Xi Jinping met in South Korea for bilateral talks, marking their first face-to-face meeting since Trump's return to power in January. Xi emphasized that the US and China should be partners and assured that China's development poses no threat to the US' 'Make America Great Again' vision. He stated his readiness to work with Trump to ensure smooth US-China relations and promote the development of the two countries. Trump announced agreements on several topics, including plans to reduce fentanyl-related tariffs on Beijing, and noted he will visit China in April.
On the corporate side, Nvidia's market value surged to $5.03 trillion as shares climbed 3% on Wednesday following the announcement of $500 billion in new orders for its Blackwell and Rubin AI chips and new partnerships. These developments led the Nasdaq to close at a record high with a 0.55% rise, while the S and P 500 followed a flat course, and the Dow Jones lost 0.16%. American futures opened slightly lower on Thursday.
Gold experienced fluctuations, falling 0.55% on Wednesday following Powell's rate cut comments, but rising 0.8% to $3,961 per ounce on Thursday. Meanwhile, the US 10-Year Treasury yield rose above 4%, hovering around 4.07% on Thursday, while the US Dollar Index fell 0.2% to 99, and Brent crude oil declined 0.2% to $64.1 per barrel amid higher oil supply estimates.
In Europe, the stock markets were mixed on Wednesday, with attention focused on the ECB's rate decision. Experts anticipate that the ECB will keep its three key rates unchanged at Thursday's meeting. Additionally, Germany and the eurozone are set to release economic growth figures, with Germany posting its preliminary consumer inflation data for October. On Wednesday, the FTSE 100 increased 0.61% and the FTSE MIB 30 rose 0.26%, while the DAX 40 fell 0.64% and the CAC 40 declined 0.19%. European futures started Thursday on a decline.