Asian stock indexes saw a mixed day on Thursday with investors reacting to the US Fed’s hint that it might ease back on its interest rate hikes following last week’s banking sector turmoil.
The Fed reiterated its commitment to fighting sticky inflation and in a widely expected move raised interest rates by 25 basis points, but it recast its outlook to a more cautious stance as a result of the banking stress.
That mixed message saw Japan’s Nikkei share average close lower, tracking an overnight slump in Wall Street, after Fed Chair Jerome Powell’s commented that the US central bank would still do “enough” to tame inflation.
The Nikkei share average edged down 0.17%, or 47.00 points, to close at 27,419.61, while the broader Topix was down 0.29%, or 5.61 points, to 1,957.32. The yen strengthened 0.60% to 130.64 per dollar.
“This month’s flare-up in financial stability is set to tighten lending conditions and hurt growth,” said Mansoor Mohi-uddin, chief economist at the Bank of Singapore. “We continue to see US recession this year.”
Technology firm MegaChips Corp and semiconductor company Axell Corp were the biggest gainers with a jump of 13.85% and 14.97%, respectively.
Hong Kong stocks surged though, as investor sentiment was lifted by the US Fed’s softer its tone on future rate hikes, though Chinese equities were mixed.
The Hang Seng Index rallied 2.34%, or 458.21 points, to 20,049.64. Tech giants trading in Hong Kong jumped 1.6%, with Tencent soaring 5.6% after its earnings release.
The Shanghai Composite Index rose 0.64%, or 20.90 points, to 3,286.65, while the Shenzhen Composite Index on China’s second exchange gained 0.62%, or 13.01 points, to 2,111.45.
Elsewhere across the region, Seoul, Taipei, Mumbai, Bangkok and Wellington were also up. However, Sydney, Singapore and Manila slipped.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 1% to touch a two-week high of 515.62. The index was on track for its best week in more than two months.
Focus now shifts to the Bank of England, with investors expecting a quarter-percentage-point increase in its policy rate after a surprise jump in inflation squashed hopes of the central bank pausing its tightening campaign.
Asia’s rally looked unlikely to spread to Europe, where futures were pointing to a lower open. Eurostoxx 50 futures were down 0.53%, German DAX futures 0.32% and FTSE futures 0.29%.
Wall Street ended sharply lower overnight as investors digested the Fed’s policy statement and comments from Fed Chair Jerome Powell’s press conference. E-mini futures for the S&P 500 rose 0.54%.
Markets are now pricing in an approximately 65% chance of the Fed pausing in its next meeting, in May, and a 35% chance of a 25 bps rise then, the CME FedWatch tool showed.
Global markets have been volatile, with bank shares battered in the past two weeks following the sudden failures of two US lenders and an emergency sale of embattled Swiss banking behemoth Credit Suisse.
Regulators and policymakers have scrambled globally to quell contagion risks and ease worries of a banking crisis, but investors remain wary that other small lenders may be vulnerable as credit markets tighten.
In the currency market, the dollar index, which measures the dollar against other major currencies, fell nearly 0.5% to fresh seven-week low of 101.92. The euro was up 0.45% at $1.0904.
The yield on 10-year Treasury notes was down 6 basis points at 3.440%, while the 30-year Treasury bond was down 3 basis points at 3.667%.
The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down 10 basis points at 3.881%.
US crude fell 1% to $70.19 per barrel and Brent was at $76.04, down 0.85%.
Tokyo – Nikkei 225 < DOWN 0.17% at 27,419.61 (close)
Hong Kong – Hang Seng Index > UP 2.34% at 20,049.64 (close)
Shanghai – Composite > UP 0.64% at 3,286.65 (close)
London – FTSE 100 < DOWN 0.93% at 7,496.54 (0933 GMT)
New York – Dow < DOWN 1.63% at 32,030.11 (Wednesday close)
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