Following the U.S. Federal Reserve’s decision to hike rates by 75 basis points to combat inflation, a move that was largely anticipated, shares in the Asia-Pacific region were generally higher on Thursday.
Hong Kong’s shares were the only one to fall among major markets. Hang Seng dropped by 0.56% following the central bank’s rate hike.
Gains were led by Australia, where the S&P/ASX 200 moved up 0.82%.
South Korea’s Kospi rose 0.81% whereas its Kosdaq increased 0.36%.
Mainland Asia’s markets increased. Shenzhen Component increased by 0.69 percent and the Shanghai Composite increased by 0.57 percent.
The Topix index was essentially steady, while the Nikkei 225 in Japan increased by 0.22 percent.
The largest Asia-Pacific share index outside of Japan, maintained by MSCI, increased by 0.59 percent.
The Fed hiked
The Fed funds rate has increased to its highest level since December 2018 as a result of the rate change.
U.S. markets rose overnight as a result of Fed Chair Jerome Powell’s comments on the next steps for the institution.
“As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation,” he said.
Two job reports and two inflation data will be released in the nearly two months leading up to the following Fed meeting, noted ING analysts in a note.
“A lot could happen in that time so it is unsurprising that the Fed is being somewhat vague in its forward guidance,” says analysts.
“The immediate priority is getting a grip on inflation, but we think the Fed will switch to 50bp hikes at the September and November FOMC meetings with a final 25bp hike in December,” they added.
According to the CME Group’s FedWatch Tool, expectations for a 50 basis point hike in September were at 66 percent on Thursday morning in Asia. According to the Fed, doing its part to lower inflation is a top priority.
Powell added that the United States is not now experiencing a recession.
However, Mark Kiesel, Pimco’s chief investment officer for global credit, claimed that the likelihood of a recession has increased.
“Persistently high inflation has no question caused global central banks to have to pivot. And that has raised the recession risks,” on Thursday, he said on “Street Signs Asia” on CNBC.
To reach 32,197.59, the Dow Jones Industrial Average increased by 436.05 points, or almost 1.4 percent. A day after Alphabet and Microsoft reported their quarterly results, the Nasdaq Composite soared 4.06 percent to 12,032.42 and the S&P 500 gained 2.62 percent to close at 4,023.61.
According to figures from the Australian Bureau of Statistics, retail sales in Asia increased for the month of June by 0.2%. The data was expected to show 0.5 percent growth, down from May’s 0.9 percent, according to economists surveyed by Reuters.
Thursday is a holiday in Thailand, so the market is closed.
The “better than feared” earnings outlook from earlier this month that sparked a rise in chip stocks was somewhat better than Samsung’s second-quarter earnings.
While revenue increased to 77.2 trillion won, operating profit improved to 14.1 trillion Korean won ($10.8 billion) as opposed to the projected 14 trillion won.
On Thursday, the price of the company’s shares increased by 0.32 percent.
Foreign currencies and oil
The U.S. dollar index, which compares the dollar to a group of its competitors, was 106.313. The Fed’s rate boost caused a significant decline.
The Japanese yen gained ground against the dollar this week, strengthening to 135.42 per dollar. As the value of the US dollar dropped, the Australian dollar traded at $0.6989.
On Thursday afternoon in Asia, oil futures increased. U.S. crude increased 1% to $98.23 a barrel, while Brent crude increased 0.61 % to $107.27.