Asian markets ignore hawkish Fed signals: Nikkei and KOSPI hit record highs
Asian stock markets are showing remarkable resilience, completely ignoring the most hawkish signal from the Federal Reserve in decades. Japan's Nikkei 225 and South Korea's KOSPI indices have hit new all-time highs, despite U.S. markets experiencing their worst day since the Fed's leadership change in 1994 the day before.
Kevin Warsh kept the key interest rate unchanged in the range of 3.5–3.75% at his first meeting, but the updated dot plot turned out to be far more hawkish than expected. The median forecast for the rate at the end of the year was raised to 3.8% from March's 3.4%. This means that nine of the eighteen committee members now expect at least one rate hike by the end of 2026.
The reaction of the U.S. market was immediate and severe: all 11 sectors of the S&P 500 index closed in the red, and the yield on two-year Treasury bonds surged by 16 basis points to 4.22%. However, the situation in Asia was fundamentally different.
Nikkei 225 Breaches the 71,000 Mark
On Thursday, Japan's Nikkei 225 index crossed the psychological barrier of 71,000 points for the first time in history. The Topix index also showed steady growth. South Korea's KOSPI updated its all-time high amid a powerful rally in technology giant stocks. SK Hynix shares jumped 3.45% after announcing the supply of trial samples of the new AI chip HBM4E to key clients, including Nvidia. Samsung Electronics shares added 1.23%.
The key driver of the Asian rally remains the theme of artificial intelligence. Investors in the region are betting that demand for semiconductors and components for AI infrastructure will continue to grow regardless of the Fed's monetary policy. While the U.S. market is fixated on interest rates and liquidity, Asian traders see fundamental growth factors.
Pressure on the Crypto Market and Prospects
For the digital asset market, the shift in the Fed's rhetoric creates significant pressure. Bitcoin and other risk assets are extremely sensitive to changes in global liquidity. If Warsh does decide to raise rates, the divergence in sentiment between Asia and the West could quickly disappear.
In my view, the current euphoria in Asian markets is temporary and largely fueled by local success stories in the AI sector. Once the macroeconomic winds change direction, the correlation between markets will be restored, and cryptocurrencies will come under additional pressure. Investors should remain cautious and not succumb to the illusion of global market disintegration.