Asia ignores the Fed's hawkish signal: Nikkei and KOSPI storm to historic highs
While American markets experienced their worst day since the Fed leadership change in 1994, Asian indices are showing remarkable resilience and even updating historical highs. Kevin Warsh left the rate unchanged at his first meeting, but the updated forecasts turned out to be much tougher than expected. However, Asia seems to be playing by its own rules.
Nikkei and KOSPI: A New Record Milestone
On Thursday, Asian markets opened on a positive note. Japan's Nikkei 225 index surpassed the 71,000-point mark for the first time in its history, while the Topix index also showed steady growth. South Korea's KOSPI updated its historical high amid a powerful rally in technology giant stocks. SK Hynix rose by 3.45% following news of supplying trial samples of the new AI chip HBM4E to key clients, including Nvidia. Samsung Electronics shares gained 1.23%.
Hawkish Signal from Warsh and Pressure on Risky Assets
While Asian indices are rising, the American S&P 500, Nasdaq, and Dow have noticeably declined. All 11 sectors of the S&P 500 index closed in the red by the evening of June 17. The yield on 2-year U.S. Treasury bonds surged by 16 basis points, reaching 4.22%. This is a classic signal of a flight from risk.
Kevin Warsh refrained from specific rate forecasts, but the dot plot showed a rise in the median forecast to 3.8% instead of 3.4% in March. Currently, 9 out of 18 Fed representatives expect at least one rate hike by the end of the year. For the market, this is an extremely hawkish signal.
For the crypto market, such a reversal in monetary policy means tangible changes. Bitcoin and other risky assets are extremely sensitive to changes in global liquidity. Tightening monetary policy is serious pressure that will eventually reach Asia as well.
Expert opinion from Cryptalist: For now, Asian markets are living off their own drivers—the AI boom and strong corporate reports. But if Warsh indeed initiates a rate hike, the divergence in sentiment will quickly disappear. Cryptocurrencies should prepare for increased volatility: a hawkish Fed and Asian optimism are two opposing vectors that will create an extremely unstable environment.