Asian Markets Rally as Federal Reserve's Rate Cut Boosts Investor Confidence

Asian equities are set to open higher on Monday, driven by the Federal Reserve's surprise quarter-point rate cut, which signaled a shift toward monetary easing amid slowing inflation and economic growth. The benchmark S&P 500 rose 1.2% the previous session, while Wall Street's overnight performance helped lift regional markets. Markets in Tokyo, Hong Kong, and Seoul are all expected to open with gains ranging from 0.7% to 1.5%. The Fed's decision, announced on December 10, 2025, was widely anticipated but the timing and dovish tone prompted a reassessment of global central bank policies. Traders are now pricing in a 40% probability of another rate cut in March 2026, up from 25% before the announcement. This shift has reduced the cost of capital for multinational firms, particularly in tech and consumer sectors, which are heavily weighted in regional indices. The Nikkei 225 is projected to open 1.3% higher, with financials and exporters benefiting from a weaker U.S. dollar. The Hang Seng Index is expected to rise 1.1%, led by gains in property and technology stocks, while South Korea's KOSPI is forecast to gain 0.9%, supported by strong inflows into semiconductor stocks. Bond yields in the U.S. and Japan both declined, with the 10-year Treasury yield dropping to 4.12% and Japan’s 10-year yield settling at 0.88%. The rally has broad implications, particularly for emerging market debt and export-oriented economies in Southeast Asia. Currency traders are adjusting positioning, with the yen weakening 0.6% against the dollar and the yuan holding steady. Investors are now turning attention to upcoming U.S. CPI and employment data, which could shape the Fed’s next move and influence regional asset flows.