Asian markets ignored the Fed's hawkish signal: Nikkei and KOSPI storm to historic highs.
While Wall Street experienced its worst day since the Fed's leadership change in 1994, Asian markets showed impressive resilience. Japan's Nikkei 225 and South Korea's KOSPI not only failed to follow the US downturn but also updated their historical highs, completely ignoring the tightening rhetoric of the Federal Reserve.
At his first meeting, Kevin Warsh left the base rate unchanged in the range of 3.5–3.75%, but the updated dot plot turned out to be much more hawkish than expected. The median year-end rate forecast was raised to 3.8% compared to March's 3.4%. This means that now 9 out of 18 FOMC members anticipate at least one rate hike by the end of the year — a signal that under normal circumstances would have triggered a global risk-off move.
Asia marches to its own beat
On Thursday, Asian indices opened with confident gains. The Nikkei 225 broke through the 71,000-point mark for the first time in history, and the Topix index also showed positive momentum. The main driver of South Korea's KOSPI was the technology sector: SK Hynix shares surged 3.45% following news of supplying trial samples of the new HBM4E AI chip to key clients, including Nvidia. Samsung Electronics shares rose by 1.23%.
Meanwhile, US indices S&P 500, Nasdaq, and Dow closed in the red, and the yield on 2-year US Treasury bonds jumped 16 basis points to 4.22%. All 11 sectors of the S&P 500 ended the day in negative territory.
Crypto market under pressure: rates rise, liquidity drains
For the digital asset market, the Fed's policy pivot is a direct blow to liquidity. Bitcoin and other risky assets are extremely sensitive to monetary policy tightening. While Asian markets enjoy a rally fueled by local corporate news, cryptocurrencies are already feeling the pressure.
My expert commentary: The Asian markets' disregard for Fed signals is a temporary phenomenon, supported by specific factors like the AI chip boom. Once the euphoria over HBM4E subsides and Warsh takes real steps to raise rates, the divergence between Asia and the rest of the world will quickly disappear. For the crypto market, this means the current period of relative stability is the best time to hedge positions. Tight Fed policy and a strong dollar represent a bearish scenario for BTC in the medium term.