GLOBAL MARKETS-Asian shares higher as Fed tempers aggressive rate hike bets

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.83%, although trading was thin with Japanese and Korean markets closed for public holidays. Marcella Chow, Hong Kong-based global market strategist at J.P. Morgan Asset Management, said the Federal Reserve's 50-basis point hike was in line with expectations, hence removing some investor concerns about a more aggressive move.


Reuters | Updated: 05-05-2022 12:25 IST | Created: 05-05-2022 12:23 IST
GLOBAL MARKETS-Asian shares higher as Fed tempers aggressive rate hike bets
Representative Image Image Credit: Pixabay

Asian shares tracked Wall Street gains on Thursday after the U.S. central bank raised interest rates by 50 basis points but sounded a less hawkish tone than some had feared, lifting investor sentiment and sending the dollar lower.

Crude prices, meanwhile, shot up as the European Union spelled out some of the details of its plan to ban the use of Russian oil, heightening concerns about supply. MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.83%, although trading was thin with Japanese and Korean markets closed for public holidays.

Marcella Chow, Hong Kong-based global market strategist at J.P. Morgan Asset Management, said the Federal Reserve's 50-basis point hike was in line with expectations, hence removing some investor concerns about a more aggressive move. "Given the Asian market has more certainty right now, I think this will probably also cause the market to rally a bit as well," she told Reuters.

Asia's gains followed a U.S. rally overnight in which the Dow Jones Industrial Average rose 2.81%, the S&P 500 gained 2.99% and the Nasdaq advanced 3.19%. Futures for the S&P 500 and NASDAQ 100 Futures Index slipped 0.17% and 0.28%, respectively, in Asian afternoon trade.

Hong Kong's benchmark Hang Seng Index rose 0.33% on Thursday, with the tech sector index adding 0.77%. This week, Hong Kong stocks have edged lower while the offshore Chinese yuan has been volatile though still stronger than it was last week.

Australia's S&P/ASX 200 performed strongly with a 0.83% increase. China's shares recovered ground lost earlier in the session, gaining 0.26% as mainland markets resumed trade after a three-day holiday.

Investors cheered a pledge by China's central bank for more monetary policy support to help businesses badly hit by the latest COVID-19 outbreak. J.P. Morgan Asset Management's Chow expects the market to make further gains after other high-level officials said they would provide further policy boost.

The Fed's half a percentage point rate increase was the biggest jump in 22 years. Fed Chair Jerome Powell said policymakers were ready to approve similar-sized rate hikes at upcoming policy meetings in June and July. Powell also said the Fed was not "actively considering" a 75 basis-point rate hike, tempering some market expectations for an aggressive tightening path.

That sent the dollar lower, where it stayed in early Asia. The dollar index, which measures the greenback against six peers, was at 102.63, having been as firm as 103.63 on Wednesday.

Sterling fell 0.61% against the dollar ahead of a meeting of the Bank of England, which is poised to raise interest rates for the fourth time since December, the fastest increase in borrowing costs in a quarter of a century. Spot gold was up 1.09% at $1,901.50 per ounce, as of 0530 GMT, after rising to its highest since April 29 earlier in the session.

U.S. Treasuries did not trade in Asia because of the holiday in Japan, although yields had fallen overnight. The benchmark 10-year yield was last 2.9402%, down from just over 3%. Gold climbed more than 1% on Thursday against a weaker U.S. dollar as investors rush to hedge inflation.

Oil extended gains on Thursday after the European Union, the world's largest trading bloc, outlined plans to phase out imports of Russian oil U.S. crude futures gained 0.67% to $108.53 a barrel and Brent rose 0.85% to $111.08. Both benchmarks rose over $5 a barrel on Wednesday.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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