[True Zoom Finance] September 19 Market Brief: How the Market Reacted to the Fed's 50 Basis Point Rate Cut
Market Highlights
l Asian stocks rose in early trading, with U.S. futures edging higher. Japanese stocks gained as the yen weakened again. WTI fell, while gold retreated from record levels.
l The Hang Seng Index in Hong Kong opened slightly lower at 17,652.42. China Construction Bank Corporation was the biggest contributor to the index's decline, falling 1.1%. Tingyi (Cayman Islands) Holding Corp. saw the largest drop, down 2.9%. In early trading, 41 out of 82 stocks fell, while 37 rose; 3 out of 4 sectors declined, with financial stocks leading the losses.
Options Summary
l $SANDS CHINA LTD(01928.HK) and $MTR CORPORATION(00066.HK) were among the stocks in the Hang Seng Index with lower put/call ratios, while others had higher put/call ratios.
l $NEW WORLD DEV(00017.HK) saw call open interest 2.6 standard deviations above its 20-day average, while Henderson Land Development's open interest was 2.19 standard deviations above its 20-day average.
l Trading in call and put options for Tencent and HSBC increased.
l For Sino Biopharmaceutical, there were about 8 call trades per put trade, while for Sinopharm Group, there were about 100 put trades and 17 call trades per put trade.
Key News
l The Hang Seng Tech Index rose as much as 2.7% on Thursday, its biggest gain since August 30, as the Fed's aggressive rate cuts spurred investor interest in growth stocks. Gary Tan, portfolio manager at Allspring Global Investments, said, "The rate cut was at the upper end of market expectations. We believe today's rebound in Hong Kong tech stocks is a response to the rate cuts, as investors become more willing to take risks in search of yield."
l Hong Kong property stocks rose after the city cut its benchmark rate for the first time since 2020 following the Fed's policy easing, a move expected to loosen borrowing conditions in the financial hub. Sun Hung Kai Properties rose 1.7%, Henderson Land gained 2.7%, and New World Development added 0.8%. The Hong Kong Monetary Authority cut rates by half a percentage point to 5.25% on Thursday, the highest level since 2007. The authority moves in lockstep with the Fed due to the city's dollar peg.
l Chinese travel-related stocks rose as Citigroup expects solid leisure travel trends during the National Day holiday. Analysts including Lydia Ling wrote in a report that the recovery in travel spending during the Mid-Autumn Festival was "encouraging," with tourism revenue exceeding the Dragon Boat Festival and per capita spending 5.9% above pre-pandemic levels.
l The domestic benchmark CSI 300 rose as much as 1.4%, its biggest gain since August 30, as expectations for further stimulus measures grew. Lin Jinghua, an analyst at Capital Securities, said, "The market expects China to cut mortgage rates in two batches, one in the near term and another early next year. If implemented, these measures are expected to help boost consumption."
l The Fed cut rates by half a percentage point in a bold shift aimed at supporting the labor market. Most policymakers backed at least another 50 basis points of easing in the remaining 2024 meetings. Traders priced in a more aggressive 70 basis points. Jerome Powell warned against assuming large moves would continue. Michelle Bowman dissented—the first governor to do so since 2005—preferring a 25-basis-point cut. A Citigroup trader who accurately predicted rate moves is reconsidering bets on further aggressive cuts.
l Oracle-backed chip designer Ampere is reportedly exploring a sale.
l Boeing asked many salaried employees to take unpaid leave and senior managers to take pay cuts to preserve cash during a strike. TDR and I Squared Capital are considering options to exit their ownership of Aggreko, according to people familiar with the matter.
l Amazon is raising warehouse workers' wages by at least $1.50 an hour and giving away Prime memberships.
l The SEC approved rules allowing thousands of exchange-traded stocks and ETFs to quote in half-cent increments. This could let venues like the NYSE and IEX better compete with wholesalers who can quote in finer increments off-exchange.
l The Bank of England is expected to keep its key rate at 5% on Thursday after last month's cut. Andrew Bailey may hint at a November cut but is unlikely to endorse faster easing.
l The financial industry is set for transformation as asset managers chase up to $10 trillion in U.S. market funds from banks, insurers, and wealthy retail clients over the next decade, McKinsey says. Firms need to win these funds to rescue "leaky boats" of stagnant revenue and declining profits.
l China and Japan reduced their holdings of U.S. Treasuries in July, while Singapore and others increased exposure.
l Economy: Australia added about 47,500 jobs in August, beating forecasts, with unemployment steady. New Zealand faces another recession as Q2 GDP shrank quarter-on-quarter.
l FedEx will report after Thursday's close, adding a new reporting segment. Sales are expected to hold steady.
l Barclays is expanding its North American investment banking business.
l Commerzbank is speeding up the process to replace CEO Manfred Knof amid a potential takeover by UniCredit.
l Intuitive Machines surged after winning another NASA contract potentially worth up to $4.8 billion.
l The SEC's Gary Gensler said too many brokers and asset managers overusing the same AI models could sow future turmoil.
l Vahan.ai raised $10 million led by Khosla Ventures to bring AI to India's blue-collar hiring.
l OpenAI hired former Coursera executive Leah Belsky as its first general manager for education, pushing into more schools.
l Chart of the Day: The Fed's big move has boosted soft-landing odds, and U.S. stocks will climb for the rest of the year, according to the MLIV Pulse survey. The rally may be too mild to push the S&P 500 above 6,000 before next year.
Today's Forex and Commodities Focus
l Most Asian currencies were flat to lower on Thursday as the dollar strengthened sharply after the Fed's big rate cut, though weaker forward rate signals offset the move.
l Oil prices fell in Asian trading on Thursday amid mixed U.S. inventory data and concerns about an economic slowdown after the Fed's aggressive rate cut.
Source: Goldhorse Capital Extramile
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