US Equities Poised to Bounce Back Post Fed Jolt – Europe Market Wrap

The US equity market is set for a small recovery on Thursday, indicating that the selloff following the Federal Reserve’s hawkish tilt was exaggerated. The yen fell as the Bank of Japan kept borrowing costs steady.

Futures contracts for the S&P 500 rose 0.5% as the US benchmark suffered its largest loss for a scheduled Fed decision day since 2001. Nasdaq 100 contracts climbed 0.4%. Key indicators in Europe and Asia fell as equities markets caught up with post-Fed developments in the United States.

The Fed reduced the number of cuts it expects in 2025 to two, as Chair Jerome Powell stated that any easing will require new progress on inflation. The reaction halted this year’s remarkable advance in US stocks, with the S&P 500 still on track to gain more than 20% thanks to confidence in AI and the economy’s prospects under a Trump government.

Money markets are pricing in fewer than two quarter-point decreases for the entire year 2025, which is even lower than the Fed’s so-called dot plot from Wednesday. In the options market linked to the Secured Overnight Financing Rate, one major block trade executed Wednesday afternoon looks to benefit from the commencement of another hike cycle next year.

The BoE had a vote split of 6-3 in favour of keeping rates on hold, which was a surprise as forecasts were for an 8-1 vote for no change. Traders reduce BoE easing bets and see only a 50% chance of a February cut.