US markets react to Fed’s first rate cut since 2024

US stocks fluctuated on Wednesday after the Federal Reserve (Fed) delivered a widely anticipated 25bps rate cut, bringing the benchmark rate to between 4%–4.25%. This marks the first reduction in borrowing costs since December 2024. Newly appointed Governor Stephen Miran was the sole dissenter, favouring a half-point cut.

The S&P 500 and Nasdaq 100 closed slightly lower, down 0.46% and 0.67% respectively, while gains in traditional sectors lifted the Dow Jones Futures by over 300 points, an increase of 0.72%. Updated FOMC forecasts pointed to stronger-than-expected growth and lower unemployment, although higher Personal Consumption Expenditures (PCE) inflation projections for next year tempered expectations of a more aggressive easing cycle. Meanwhile, the US Dollar Index fell to 96.4, its lowest level since February 2022, as traders digested the latest FOMC decision. Consumer staples and credit services led the day’s gains, with P&G, Philip Morris, and American Express each rising around 2%, while Nvidia slipped 3% and Broadcom dropped 4.5% following reports that China’s internet regulator had barred major domestic tech firms from acquiring their AI chips.

In the bond market, the yield on the 10-year US Treasury fell to 4%, its lowest level in five months, following the rate cut. Yields on shorter-dated Treasuries fell more sharply, pushing the spread between the 10-year and 2-year notes wider. The Fed also maintained the pace of quantitative tightening despite a significant reduction in its overnight reverse repo facility since the previous meeting. 

South Africa’s annual inflation rate eased to 3.30% in August 2025, down from a 10-month high of 3.50% and below market expectations of 3.60%. The rate remains comfortably within the South African Reserve Bank’s (SARB) target range of 3% to 6%. The local equity market responded positively, with the JSE All Share Index rising 0.46% and the Top 40 gaining 0.48%. By 20h48 SAST, the rand had strengthened by 1.92% to trade at R17.36 against the US dollar.

Asian markets ended broadly higher on Wednesday following the US rate cut, which lifted investor sentiment and raised expectations of further easing and capital inflows into emerging markets. The Shanghai Composite advanced 0.32%, while Hong Kong’s Hang Seng jumped 1.78%, supported by positive developments in US–China relations and ongoing policy support. In contrast, Japan’s Nikkei 225 fell 0.25% as investors booked profits. 

European markets showed a mixed performance, with the STOXX 600 closing slightly lower at 550.63 points, down 0.03%, and the STOXX 50 edging down 0.05% to 5 369.70 points. The UK’s FTSE 100, however, rose 0.14% to 9 208.37, supported by gains in consumer staples and credit services, with Procter & Gamble, Philip Morris and American Express each climbing around 2%. Despite these movements in equities, the UK’s annual inflation rate remained steady at 3.80%, close to levels last seen in January 2024, in line with market expectations. Germany’s DAX also posted a modest gain of 0.08%, closing at 23 346.95.

Following US market reactions to the rate cut, attention also turned to commodities, where safe-haven and energy markets responded to both policy shifts and global supply concerns. Gold retreated to around $3 680 an ounce on Wednesday, after briefly hitting a record high of $3 704 following the announcement. The metal has surged roughly 41% year-to-date, supported by strong central bank purchases and safe-haven demand.

In energy markets, Brent crude futures eased to about $68 a barrel, pausing a three-day rally as traders assessed potential supply risks from recent drone strikes on Russian energy infrastructure. Industry sources reported that Russia’s pipeline operator, Transneft, had warned producers they might need to cut output after Ukrainian attacks hit key export terminals and refineries. Transneft later dismissed the report on its website, calling it Western disinformation. Meanwhile, European officials signalled plans to accelerate the reduction of Russian fossil fuel imports and called for tougher measures to increase economic pressure on Moscow. US crude inventories also showed notable movement, with EIA data revealing a decline of 9.3 million barrels last week – the sharpest drop in three months – adding further support to oil markets.