Asian Shares Rise As Fed Fights Inflation

Asian stocks advanced on Thursday after the U.S. Federal Reserve hiked rates by 75 basis points – the biggest increase since 1994 – and left the door open for another rate increase of that magnitude in July to lower inflation, which is at a 40-year high.

Longer-dated U.S. government bond yields fell and the dollar retreated from a 20-year high after Fed projections showed rising unemployment and economic growth slowing to a below-trend rate of 1.7 percent. Fed officials anticipate being able to cut interest rates in 2024.

China’s Shanghai Composite index was up 0.2 percent at 3,310 as investors remained hopeful of a smooth demand recovery post-lockdowns. Hong Kong’s Hang Seng index was marginally lower, giving up early gains.

Japan’s Nikkei index was up 1.4 percent as attention shifted to the Bank of Japan policy meeting Friday, where the central bank is expected to stick with all its main policy settings.

Japan posted its biggest trade deficit in more than eight years for May as high commodity prices and declines in the yen swelled imports, data showed earlier today.

Seoul shares rallied, with the Kospi average climbing 1.4 percent to 2,483. Most large-cap shares traded higher, with tech and bio shares leading the surge.

Australian markets were moving higher after data showed the nation’s jobless rate remained steady at 3.9 percent last month with a better-than-expected 60,600 jobs added to the economy.

The benchmark S&P/ASX 200 rose half a percent to 6,633, with property and tech stocks pacing the gainers. New Zealand’s benchmark S&P NZX-50 index was up 0.9 percent at 10,731.

U.S. stocks rallied overnight as the Fed intensified its drive to tame high inflation through interest-rate increases and balance sheet reduction.

After raising the target interest rate by 75 basis points – the biggest increase since 1994 – and cutting growth projection, the Fed suggested that “unusually large” moves of that scale likely wouldn’t become common.

Fed Chair Jerome Powell said he expected either a 0.50 percentage point or 0.75 percentage point increase at the Fed’s July meeting.

The S&P 500 added 1.5 percent to snap a five-day losing streak despite weak retail sales, New York factory activity and housing data. The Dow gained 1 percent and the tech-heavy Nasdaq Composite climbed 2.5 percent.

European stocks snapped their six-day losing streak on Wednesday as the European Central Bank proposed to create a new tool aimed at shielding weaker eurozone economies from higher borrowing costs.

The pan European Stoxx 600 jumped 1.4 percent. The German DAX and France’s CAC 40 index both climbed around 1.4 percent while the U.K.’s FTSE 100 advanced 1.2 percent.

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