BANGKOK (AP) — Asian shares were mostly higher in cautious trading yesterday as the Federal Reserve and other central banks prepared for the year’s final barrage of interest rate hikes.
Oil prices gained more than USD1 a barrel.
Markets have struggled this year thanks to high inflation and the interest rate hikes engineered to combat it. Higher rates slow business activity by design but also risk causing a recession if they go too high, all while dragging down prices of investments.
The next big milestone comes with yesterday’s release of the latest update on inflation at the consumer level.
Economists have forecast that inflation slowed to 7.3 per cent last month from 7.7 per cent in October.
Policymakers at the Federal Reserve began a meeting yesterday.
When it wraps up today, investors expect the central bank to announce its last rate hike of the year. Other central banks around the world, including the European Central Bank, are also likely to raise their own rates by half a percentage point this week.
Germany’s DAX edged up 0.2 per cent to 14,330.18 early yesterday, while the CAC 40 in Paris added less than 0.1 per cent, to 6.653.81. London’s FTSE 100 edged up three points to 7,449.05.
“It’s been a do-nothing day as investors take stock before the onslaught of a series of high-risk events,” Stephen Innes of SPI Asset Management said in a commentary.
In Asian trading, Tokyo’s Nikkei 225 rose 0.4 per cent to 27,961.66 while the Hang Seng in Hong Kong gained 0.5 per cent to 19,559.93. Australia’s S&P/ASX 200 picked up 0.3 per cent to 7,203.30.
In Seoul, the Kospi shed 0.3 per cent to 2,366.89. The Shanghai Composite index was flat at 3,179.71. Shares fell in India but rose in Singapore and Bangkok.
The futures for the Dow industrials and S&P 500 were little changed at less than 0.1 per cent higher.
The Fed has hinted it will dial down the size of its rate hikes, leading to expectations for a more modest increase of 0.50 percentage points today after four straight mega-hikes of 0.75 percentage points.
Each of those was triple the Fed’s usual move, and they lifted the central bank’s key overnight rate to a range of 3.75 per cent to four per cent. It started the year at virtually zero.
Economists at Goldman Sachs expect Fed policymakers on today to signal their median expectation is for rates eventually to hit a range of five per cent to 5.25 per cent.
Even if inflation is waning, the global economy still faces threats from the rate increases already pushed through.
The housing industry and other businesses that rely on low interest rates have shown particular weakness, and worries are rising about the strength of corporate profits broadly.
Besides raising short-term rates, the Fed is also making other moves with its vast trove of bond investments that should effectively allow longer-term yields to rise.
On Wall Street on Monday, the S&P 500 rallied 1.4 per cent while the Dow Jones Industrial Average added 1.6 per cent.
The Nasdaq climbed 1.3 per cent and the Russell 2000 gained 1.2 per cent.
The yield on the 10-year Treasury, which helps set rates for mortgages and other loans, rose to 3.61 per cent from 3.59 per cent late last Friday.