Asian shares higher as Fed tempers rate hike bets

Investors cheered a pledge by China’s central bank for more monetary policy support

Asian shares tracked Wall Street gains yesterday after the US 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 per cent, although trading was thin with Japanese and Korean markets closed for public holidays.

Marcella Chow, Hong Kongbased 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 US rally overnight in which the Dow Jones Industrial Average rose 2.81 per cent, the S&P 500 gained 2.99 per cent and the Nasdaq advanced 3.19 per cent.

Futures for the S&P 500 and NASDAQ 100 Futures Index slipped 0.17 per cent and 0.28 per cent, respectively, in Asian afternoon trade.

Hong Kong’s benchmark Hang Seng Index rose 0.33 per cent yesterday, with the tech sector index adding 0.77 per cent.

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 per cent increase.

China’s shares recovered ground lost earlier in the session, gaining 0.26 per cent 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.

JP 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 per centage 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 per cent 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 per cent at $1,901.50 per ounce, as of 0530 GMT, after rising to its highest since April 29 earlier in the session.

US 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 per cent, down from just over 3 per cent.

Gold climbed more than 1 per cent yesterday against weaker US dollar as investor rush to hedge inflation.

Oil extended gains yesterday after the European Union, the world’s largest trading bloc, outlined plans to phase out imports of Russian oil

US crude futures gained 0.67 per cent to $108.53 a barrel and Brent rose 0.85 per cent $111.08. Both benchmarks rose over $5 a barrel on Wednesday.