Asian shares, oil prices mostly higher after Fed rate hike

Bangkok, July 28: Shares were mostly higher in Asia on Thursday after the Federal Reserve ratcheted up its campaign against surging inflation by raising its key interest rate three-quarters of a point.
Hong Kong’s benchmark Hang Seng index slipped 0.6 per cent to 20,554.09 after the territory’s Monetary Authority matched the Fed’s 0.75 percentage point rate hike with one of its own.
The HKMA aligns its policies with US monetary moves to keep the Hong Kong dollar at a stable rate with the US dollar.
Elsewhere in the region, shares advanced, tracking gains on Wall Street after the Fed did exactly as expected and its chair, Jerome Powell, suggested the Fed’s rate hikes have already had some success in slowing the economy and possibly easing inflationary pressures.
Investors are awaiting an update on US economic growth and a call between US President Joe Biden and Chinese leader Xi Jinping.
“While a concrete decision on tariff relief is not expected from the meeting, any indications of willingness in working toward that is an added positive for markets,” Jun Rong Yeap of IG said in a commentary.
Tokyo’s Nikkei 225 edged 0.2 per cent higher to 27,761.53 while the Shanghai Composite index added 0.6 per cent to 3,294.42. In Seoul, the Kospi advanced 0.7 per cent to 2,432.91.
Australia’s S and P/ASX 200 jumped 0.9 per cent to 6,881.80 after the government reported that retail sales rose in June for the sixth consecutive month. Markets in Thailand were closed for a holiday.
On Wall Street investors welcomed the Fed’s widely expected move — which took its key interest rate to its highest level since 2018 — with a broad rally on Wednesday.
Powell’s comments were taken by some as a signal the Fed may not have to raise rates so aggressively in coming months, triggering a rally in the final hour of regular trading.
The S and P 500 climbed 2.6 per cent to 4,023.61 and the tech-heavy Nasdaq surged 4.1 per cent, its biggest gain in over two years, to 12,032.42.
The Dow Jones Industrial Average rose 1.4 per cent to 32,197.59. Smaller company stocks also gained, lifting the Russell 2000 2.4 per cent higher, to 1,848.34.
The indexes are now all on pace for a weekly gain, extending Wall Street’s strong July rally. The S and P 500 is up 6.3 per cent so far this month.
Bond yields turned broadly lower following the Fed’s announcement. The two-year Treasury yield, which tends to move with expectations for the Fed, fell to 2.98 per cent from 3.06 per cent late Tuesday. The 10-year yield, which influences mortgage rates, fell to 2.78 per cent from 2.79 per cent.
Rate increases like Wednesday’s, the fourth so far this year, make borrowing more expensive and slow the economy.
The hope is that the Fed and other central banks can deftly find the middle ground where the economy slows enough to whip inflation but not enough to cause a recession.
In a note on Wednesday, analysts at Citi said that while Powell mentioned that a slowdown in hikes would be appropriate at some point, exactly when that might be remains unclear, adding that they “would not view this as a particularly dovish comment”.
“We continue to expect core inflation to push the Fed to hike more aggressively than they or markets anticipate,” the analysts wrote, noting they expect the Fed will announce another three-quarter point increase at its September policy meeting, with further rate hikes continuing into early 2023.
Meanwhile, some parts of the economy are already slowing, particularly the housing industry. Sales of previously occupied US homes slowed in June for the fifth month in a row as mortgage rates have climbed sharply this year.
An update on the economy will come later Thursday with second quarter US GDP data.
Shares in Microsoft and Google parent Alphabet rose 6.7 per cent and 7.7 per cent, respectively, after their latest quarterly reports.
Spotify Technology vaulted 12.2 per cent after the music streaming service reported monthly active user and premium subscriber numbers that exceeded the Street’s expectations.
In other trading on Thursday, US benchmark crude oil added USD 1.04 to USD 98.30 per barrel in electronic trading on the New York Mercantile Exchange. It gained USD 2.28 to USD 97.26 on Wednesday.
Brent crude, the international standard for pricing, gained 93 cents to USD 102.60 per barrel.
The US dollar cost 135.44 Japanese yen, down from 136.55 yen. The euro rose to USD 1.0208 from USD 1.0197. (AP)