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Thursday, February 9, 2023
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Thursday, February 9, 2023
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    Asian shares gain after Fed signals slower rate hikes

    BANGKOK (AP) – Shares advanced in Asia yesterday after a rally on Wall Street spurred by the Federal Reserve (Fed) chair’s comments on easing the pace of interest rate hikes to tame inflation.

    Tokyo’s Nikkei 225 index added 0.9 per cent to 28,226.08 while the Hang Seng in Hong Kong advanced 1.4 per cent to 18,859.73. The Shanghai Composite index climbed 0.5 per cent to 3,166.23. In Seoul, the Kospi picked up 0.3 per cent to 2,479.84. Australia’s S&P/ASX 200 gained one per cent to 7,354.40.

    Bangkok’s SET rose 0.9 per cent a day after the central bank raised its key interest rate by a quarter point to 1.25 per cent, aiming to curb inflation.

    On Wednesday, United States (US) Fed Chair Jerome Powell, said in comments at the Brookings Institution that the central bank could begin moderating its pace of rate hikes as soon as December, when its policymaking committee will hold its next meeting.

    “We have a risk management balance to strike,” Powell said.

    “And we think that slowing down (on rate hikes) at this point is a good way to balance the risks.”

    Stocks roared higher. The benchmark S&P 500 rose 3.1 per cent, snapping a three-day losing streak and closing at 4,080.11. The Dow Jones Industrial Average gained 2.2 per cent to 34,589.77 and the Nasdaq composite climbed 4.4 per cent to 11,468.

    A man walks by monitors showing the Japanese yen against other foreign currencies at a securities firm in Tokyo. PHOTO: AP

    Small company stocks also rallied. The Russell 2000 index rose 2.7 per cent to 1,886.58.

    More than 95 per cent of the stocks in the S&P 500 advanced, led by technology companies.

    Apple rose 4.9 per cent and Microsoft jumped 6.2 per cent.

    “The optimism in the market is that perhaps the worse is over for the US in terms of inflation reading, and the Fed isn’t going to increase the interest aggressively,” Naeem Aslam of Avatrade said in a commentary.

    Powell’s comments sent Treasury yields sharply lower. The yield on the 10-year Treasury dropped to 3.62 per cent from 3.75 per cent late on Tuesday.

    The yield on the two-year note, which tends to track market expectations of future Fed action, fell to 4.34 per cent.

    It was trading at 4.48 per cent late on Tuesday and had been as high as 4.53 per cent shortly before Powell’s speech.

    While citing some recent signs that inflation is cooling, Powell stressed that the Fed will push rates higher than previously expected and keep them there for an extended period to ensure inflation comes down sufficiently.

    Major indexes have been unsteady all year as the economy and financial markets dealt with stubbornly hot inflation and the Fed’s attempt to cool high prices with aggressive interest rate increases. Wall Street has been hoping that the Fed will slow the scale and pace of its interest rate hikes. It has raised its benchmark interest rate six times since March, driving it to a range of 3.75 per cent to four per cent, the highest in 15 years.

    The goal is to make borrowing more costly and generally slow the economy in order to tame inflation. The economy has been slowing, and many economists expect the US to slip into a recession next year.

    Consumers have continued spending, despite inflation squeezing wallets.

    Overall, employment remains strong, though job openings dropped in October more than economists had anticipated and human resources company ADP reported an easing in private sector hiring in November.

    In other trading yesterday, US benchmark crude oil lost 41 cents to USD80.14 a barrel in electronic trading on the New York Mercantile Exchange. It climbed three per cent on Wednesday.

    Brent crude, the pricing basis for international trading, shed 54 cents to USD86.43 a barrel.

    The US dollar fell to JPY136.32 from JPY138.09. The euro rose to USD1.0454 from USD1.0409.

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