Asian stocks higher after US Fed signals more rate hikes

Markets in Shanghai, Tokyo and Sydney rise after Fed meeting flags possibility of “even more restrictive stance”.

Asian stock markets gained Thursday after the US Federal Reserve said higher interest rates might be needed to cool inflation.

Shanghai, Tokyo and Sydney advanced, and Hong Kong declined, while oil prices fell more than $1 per barrel to stay below $100.

Wall Street’s benchmark S&P 500 index gained 0.4 percent on Wednesday after notes from the latest Fed meeting said “an even more restrictive stance could be appropriate” to get inflation back to its 2 percent target. They acknowledged that could weaken the economy.

Investors worry aggressive US and European rate hikes to contain rising prices that are running at a four-decade high might depress global economic activity.

“Stocks rose because runaway commodity and oil prices are sinking,” said Stephen Innes of SPI Asset Management. “Both are the critical targets Fed policy is engineered to tame; hence, inflation expectation is coming under control.”

The Shanghai Composite Index rose 0.1 percent to 3,359.16 and the Nikkei 225 in Tokyo gained 0.8 percent to 26,304.12. The Hang Seng in Hong Kong lost 0.3 percent to 21,527.48.

The Kospi in Seoul climbed 1.8 percent to 2,333.74 and Sydney’s S&P-ASX 200 was 0.3 percent higher at 6,613.30. New Zealand declined while Southeast Asian markets advanced.

On Wall Street, the S&P 500 rose to 3,845.08. The Dow Jones Industrial Average gained 0.2 percent to 31,037.68. The Nasdaq composite added 0.3 percent to 11,361.85.

The Fed last month raised its key interest rate by three-quarters of a point to a range of 1.5 percent to 1.75 percent, the biggest single increase in nearly three decades. Chair Jerome Powell suggested at that time a rate hike of one-half or three-quarters of a point, three times the Fed’s usual margin, was likely when policymakers meet later this month.

Notes released Wednesday from the Fed’s June 14-15 meeting confirmed other officials agreed that such an increase would “likely be appropriate”.

Inflation has been boosted by Russia’s attack on Ukraine, which pushed up prices of oil and other commodities, and Chinese anti-virus controls that shut down Shanghai and other industrial centres.

Oil prices closed below $100 per barrel on Tuesday for the first time since early May but US crude is still up more than 30 percent this year.

Benchmark US crude fell $1.04 to $97.49 per barrel in electronic trading on the New York Mercantile Exchange. The contract lost 97 cents to $98.53 a barrel Wednesday. Brent crude, the price basis for international trading, lost $1.19 to $99.50 per barrel in London. It tumbled $2.08 the previous session to $100.69.

The dollar declined to 135.72 yen from Wednesday’s 135.98 yen. The euro gained to $1.0206 from $1.0182.