Asian stocks gain after Fed chair signals slower rate hikes

TOKYO – Stocks in Asia rose on Thursday after a Wall Street rally spurred by comments from the US Federal Reserve Chair about slowing the pace of interest rate hikes to tame inflation.

Signs China may be shifting its approach to containing COVID-19 outbreaks to focus more about vaccinations also helped drive stock buying across the region.

Tokyo’s Nikkei 225 index rose 0.9% to 28,226.08, while Hong Kong’s Hang Seng rose 1.4% to 18,859.73. The Shanghai Composite Index rose 0.5% to 3,166.23. In Seoul, the kospi rose 0.3% to 2,479.84. Australia’s S&P/ASX 200 rose 1% to 7,354.40.

Bangkok’s SET rose 0.9% a day after the central bank hiked interest rates by a quarter point to 1.25% in a bid to curb inflation.

On Wednesday, in comments at the Brookings Institution, Fed Chair Jerome Powell said the central bank could start to slow the pace of rate hikes already in December, when its policy-making committee will hold its next meeting.

“We have to find a balance in risk management,” Powell said. “And we think slowing down (in rate hikes) at this point is a good way to offset the risks.”

Stocks rose higher. The benchmark S&P 500 index rose 3.1%, breaking a three-day losing streak to close at 4,080.11. The Dow Jones Industrial Average was up 2.2% to 34,589.77 and the Nasdaq Composite was up 4.4% to 11,468.

Small company stocks also rallied. The Russell 2000 Index rose 2.7% to 1,886.58.

More than 95% of stocks in the S&P 500 are up, led by technology companies. Apple rose 4.9% and Microsoft rose 6.2%.

“The optimism in the market is that the worst may be over for the US in terms of inflation data and the Fed will not aggressively hike rates,” Avatrade’s Naeem Aslam said in a comment.

Powell’s comments caused government bond yields to fall significantly. The yield on the 10-year Treasury fell to 3.62% from 3.75% late Tuesday. The yield on the two-year bond, which tends to match market expectations for future Fed action, fell to 4.34%. It was trading at 4.48% late Tuesday and had peaked as high as 4.53% just prior to Powell’s speech.

While citing some recent signs of a slowdown in inflation, Powell stressed that the Fed will push rates higher than previously expected and will hold them there for an extended period to ensure inflation falls sufficiently.

“History strongly warns against relaxing policy prematurely,” Powell said. “We will hold the course until the job is done.”

Major indices were unstable throughout the year as the economy and financial markets grappled with stubbornly hot inflation and the Fed’s attempt to cool high prices with aggressive rate hikes.

Wall Street has been hoping the Fed will slow the scale and pace of its rate hikes. It has raised interest rates six times since March, bringing them to a range of 3.75% to 4%, the highest in 15 years. The goal is to make borrowing more expensive and slow down the economy in general to tame inflation.

Higher mortgage rates have caused home sales to slump, and higher interest rates have also increased the cost of most other consumer and business loans.

The economy is slowing and many economists expect the US to slide into recession next year. But there are strong nests of growth. The government announced this on Wednesday Economy expanded at an annual rate of 2.9% from July to September, an upgrade from its original estimate.

Consumers have continued to spend despite inflation weighing on wallets. Overall employment remains strong, although job vacancies fell more in October than economists had expected and staffing firm ADP reported a fall in private sector hiring in November.

Investors will get more data on the employment sector on Thursday with a report on weekly jobless claims. The widely acclaimed monthly report on the labor market will be published on Friday.

In other trading Thursday, US benchmark crude fell 41 cents to $80.14 a barrel in electronic trading on the New York Mercantile Exchange. It was up 3% on Wednesday.

Brent crude, the price basis for international trade, fell 54 cents to $86.43 a barrel.

The US dollar fell to 136.32 Japanese yen from 138.09 yen. The euro rose to $1.0454 from $1.0409.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, transcribed or redistributed without permission. Asian stocks gain after Fed chair signals slower rate hikes

Sarah Y. Kim

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