Asian Stocks Up, Boosted by Reaction to Fed’s As-Expected Rate Hike By

© Reuters.

by Gina Lee – Asia Pacific shares were mostly up on Thursday morning, propelled by US stocks and bonds. Investors heaved a sigh of relief after the US Federal Reserve’s latest estimates showed further upside concerns.

China’s 10 PM ET (2 AM GMT) was up 0.53% while it fell 0.79%. Chinese markets reopen after the holiday, and .

In Australia, there was an increase of 0.63% with figures released earlier in the day contracting 18.5% month-on-month in March 2022. Data also showed that it grew 0%, contracting 5% month-on-month at AUD9.314 billion ($6.66 billion).

Hong Kong rose 1.22%.

Japanese and South Korean markets are closed for the holiday.

Australian debt rose after a fall in the two-year US Treasury yield, while cash Treasury trading in Asia did not take off due to a holiday in Japan.

The Federal Open Market Committee raised its interest rate to 1%, the biggest increase since 2000, as it delivered its policy decision on Wednesday. Fed Chairman Jerome Powell said the 75-basis point super-hike feared by investors “isn’t something the committee is actively considering,” adding that policymakers are looking at a “neutral” level of the fed funds rate. Let’s look at 2% to 3%.

“Today’s action was significantly overpriced in the market,” Ken Shinoda, fund manager at DoubleLine Group LP, told Bloomberg.

“In fact, I think today’s action was a little less swift than some people expected.”

The Fed also said it would allow it to reduce its holdings of treasuries and mortgage-backed securities at an initial combined monthly pace of $47.5 billion in June, increasing over three months to $95 billion.

The market reaction is likely to evolve as investors digest Powell’s remarks, but swaps linked to Fed meetings are now pricing in less than 150 basis points of further rate hikes in the June, July and September 2022 decisions.

“The market remains very optimistic about the Fed’s ability to reduce inflation,” Nancy Davis, chief investment officer at Quadratic Capital Management LLC, said in a note.

“We could be facing an environment of stagflation.”

Ongoing risks include tighter monetary policy, the Russian offensive on February 24 and the ongoing war in Ukraine stemming from China’s COVID-19 outlook. The European Union is also planning to impose sanctions on Russian barrels over the next six months, while wheat prices rose on the prospect of export restrictions by India, a major producer.

Across the Atlantic, Will will hand in its policy decision later in the day, where it is expected to raise rates to their highest level in 13 years.

The US will release its jobs report, which is included, a day later.

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