BANGKOK (AP) – Asian shares were mostly higher yesterday after the Federal Reserve (Fed) raised interest rates to their highest level in more than two decades, just as Wall Street expected.
Market attention turned to a decision later in the day by the European Central Bank (ECB) and to whether Japan’s central bank might alter its longstanding ultra-lax monetary policy at a policy meeting that ends today.
The ECB is expected to follow the Fed’s example.
“Today, all eyes will be on the ECB, where a 25 basis point hike is widely expected along with the door being left open for another hike in September,” ING Economics said in a commentary.
A 0.25 percentage point hike would take the ECB’s benchmark rate to 4.25 per cent.
Tokyo’s Nikkei 225 index gained 0.7 per cent to 32,891.16 and the Hang Seng in Hong Kong jumped 0.9 per cent to 19,545.77.
The Shanghai Composite index slipped 0.3 per cent to 3,213.20. In Australia, the S&P/ASX 200 added 0.7 per cent to 7,455.90. South Korea’s Kospi climbed 0.4 per cent to 2,603.81. Bangkok’s SET rose 0.8 per cent.
Stocks on Wall Street held steady on Wednesday.
The S&P 500 slipped less than 0.1 per cent to 4,566.75, remaining near a 15-month high.
The Dow Jones Industrial Average rose 0.2 per cent to 35,520.12, and the Nasdaq composite slipped 0.1 per cent, to 14,127.29.
The bond market moved more sharply, and Treasury yields fell after Fed Chair Jerome Powell said no decision had been made about whether to raise rates at its next meeting or beyond.
That may have bolstered hopes among traders that Wednesday’s hike could be the last for a long time.
Microsoft weighed on the market after falling 3.8 per cent despite reporting better profit and revenue for the spring than expected.
Helping to limit the market’s losses was Alphabet, which rose 5.6 per cent. The parent company of Google and YouTube reported better profit and revenue for the spring than analysts expected.
What Big Tech titans do matters more for Wall Street than other stocks because they have become so influential due to their massive size.
Seven stocks alone accounted for most of the S&P 500’s returns through the first half of this year, largely on expectations that their explosive growth will continue. They’ll need to deliver big profits to justify those gains.
Meta Platforms, another member of the ‘Magnificent Seven’, reported its results after trading closed for the day. Its stock has soared 148 per cent so far this year, while Alphabet and Microsoft are both up more than 40 per cent.
Boeing, meanwhile, helped prop up the Dow Jones Industrial Average, which has less of an emphasis on Big Tech than the S&P 500. The aircraft maker reported a smaller loss for the spring than analysts expected, and revenue topped expectations.
In the bond market, the highlight was the Fed’s move to raise its federal funds rate to a range of 5.25 per cent to 5.50 per cent in hopes of wrestling down high inflation. That’s its highest level since 2001 and up from virtually zero early last year.
Rate increases work to lower inflation by grinding down on the entire economy, raising the risk of a recession and hurting prices for investments. Ending them would encourage more borrowing and investment.
The economy has so far defied predictions for a recession, largely because of a remarkably solid job market that has allowed United States (US) households to keep spending. That has hopes rising that the Fed can pull off a “soft landing” for the economy where high inflation falls back to its target without a painful recession.
The Fed’s Powell said on Wednesday that rates will likely need to stay high for a while to drive inflation lower.
“It’s really dependent so much on the data, and we just don’t have it yet,” Powell said.
The yield on the 10-year Treasury fell to 3.86 per cent from 3.89 per cent late Tuesday. It helps set rates for mortgages and other important loans.
In other trading yesterday, US benchmark crude oil gained 60 cents to USD79.38 per barrel in electronic trading on the New York Mercantile Exchange. It fell 85 cents to USD79.78 on Wednesday.
Brent crude, the international standard, added 46 cents to USD83.02 per barrel.
The dollar fell to JPY140.09 from JPY140.25. The euro rose to USD1.1096 from USD1.1087.
