Asian stocks tend to be higher ahead of the Fed’s rate hike decision

BANGKOK – Asian stocks were mostly higher on Tuesday as the Federal Reserve and other central banks braced for the last wave of rate hikes of the year.

Tokyo’s Nikkei 225 rose 0.4% to 27,961.66, while Hong Kong’s Hang Seng rose 0.5% to 19,559.93. Australia’s S&P/ASX 200 rose 0.3% to 7,203.30.

In Seoul, the Kospi slipped 0.3% to 2,366.89. The Shanghai Composite Index was unchanged at 3,179.71. Stocks fell in India and Taiwan but rose in Singapore and Bangkok.

Markets have struggled this year due to high inflation and planned rate hikes to combat it. Higher interest rates inherently slow business activity, but also risk a recession if they get too high, while dragging down investment prices.

On Wall Street, the S&P 500 rose 1.4% to 3,990.56 on Monday. The Dow Jones Industrial Average rose 1.6% to 34,005.04. The Nasdaq rose 1.3% to 11,143.74. The Russell 2000 was up 1.2% to 1,818.61.

The indices had their first weekly loss in three weeks.

Technology stocks accounted for a large portion of the market gains. Microsoft rose 2.9% and was the single largest force lifting the S&P 500. The London Stock Exchange Group agreed to a 10-year deal that will see it move data to the Microsoft cloud and spend at least $2.8 billion. Microsoft also takes a 4% stake in the company.

Horizon Therapeutics then rose 15.5% This was announced by Amgen it would acquire the biopharmaceutical company for about $26.4 billion.

The rally came on Tuesday and ahead of a key inflation report a meeting of policymakers at the Federal Reserveafter which investors expect the Fed to announce its last rate hike of the year on Wednesday after a blitz that began in March.

The Fed has indicated that it will scale back the scope of its rate hikes, leading to expectations for a more modest 0.50 percentage point hike on Wednesday.

That would follow four consecutive mega-jumps of 0.75 percentage points. Each was triple the Fed’s usual moves, and they hiked the central bank’s key overnight rate to a range of 3.75% to 4% after starting the year from practically zero.

Other central banks around the world are also likely to hike their own rates by half a percentage point this week, including the European Central Bank.

Goldman Sachs economists expect Fed policymakers to signal Wednesday that they expect median rates to eventually reach a 5% to 5.25% range.

Even if inflation subsides, the global economy is still threatened by the interest rate hikes that have already been implemented. The housing industry and other businesses dependent on low interest rates have been particularly weak, and concerns about the strength of corporate earnings are growing more generally.

The next big milestone for the markets comes later on Tuesday with the release of the latest update on consumer-level inflation. Economists have forecast inflation to have slowed to 7.3% last month from 7.7% in October.

In addition to raising short-term interest rates, the Fed, with its vast bond investment fund, is taking other steps that should allow longer-term yields to rise.

The yield on the 10-year Treasury to help set it Mortgage interest rates and other credit rose to 3.61% from 3.59% late Friday. The two-year yield, which tends to be closer to expectations for the Fed, rose to 4.39% from 4.34%.

Energy producers rose on Monday after US oil prices settled 3% higher. ExxonMobil rose 2.5%.

U.S. benchmark crude was up $1.04 to $74.21 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the price basis for international trade, rose $1.15 to $79.14 a barrel.

Last week, crude oil prices scratched their lowest levels for the year on worries about a slowing global economy that would mean lower energy demand.

In forex trading, the dollar rose to 137.69 Japanese yen from 137.68 yen. The euro advanced from $1.0534 to $1.0543.


AP Business Writers Stan Choe and Alex Veiga contributed.

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Sarah Y. Kim

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