Asia ignores the Fed: Nikkei and KOSPI set new records amid hawkish signal from Waller
Asian stock markets are showing remarkable resilience, completely ignoring the most aggressive signal from the Federal Reserve in decades. Japan's Nikkei 225 index surpassed the 71,000-point mark for the first time in history, and South Korea's KOSPI also hit a new all-time high. This growth comes amid the worst day for Wall Street since the Fed leadership change in 1994.
Kevin Warsh, at his first meeting as Fed chair, kept the base rate in the range of 3.5–3.75%, but the updated dot plot turned out to be much more hawkish than expected. The median rate forecast for the end of the year was raised to 3.8% from March's 3.4%. Nine of the eighteen committee members now expect at least one rate hike by the end of the year.
While U.S. indices S&P 500, Nasdaq, and Dow closed in the red, and the two-year Treasury yield surged 16 basis points to 4.22%, Asian markets opened trading with confident gains. A key driver for KOSPI was the rise in SK Hynix shares by 3.45% following news of delivering trial samples of the new AI chip HBM4E to major clients, including Nvidia. Samsung Electronics shares also added 1.23%.
The Paradox of Asian Resilience
The behavior of Asian markets is in clear contradiction with sentiment in the West. Sona Vargis, chief macro analyst at Carson Group, rightly notes that the new Fed forecasts "spoiled the mood in the markets." However, Asia is not yet paying attention to these signals, focusing on local growth drivers, especially in the semiconductor and artificial intelligence sectors.
For the crypto market, this situation creates a unique dynamic. On one hand, monetary policy tightening traditionally pressures risky assets. On the other, the divergence between Asian and U.S. markets could signal capital flows, which is potentially positive for cryptocurrencies in the medium term.
My analysis shows that the current divergence between Asian and U.S. markets cannot be sustainable. If Warsh indeed initiates a rate hike, which is now being priced in, Asian optimism will quickly fade. Crypto investors should closely monitor the dynamics of Nikkei and KOSPI as early indicators of global risk appetite. As long as Asia holds, Bitcoin has a chance to maintain current levels, but any reversal in the East will trigger a new wave of pressure.