Stocks in Asia are poised for muted gains after US equities inched higher after the Federal Reserve paused interest rate hikes but warned further increases this year remain on the table.
Futures for equity benchmarks in Japan, Australia and Hong Kong advanced. US contracts were moderately higher in early Asian trading following the 0.1% rise for the S&P 500 on Wednesday, which closed at the highest level since April last year. The Nasdaq 100 rose 0.7%, bringing its gain since the start of the year to 37%.
The dollar fell to trade near a one-month low, as the Australian dollar was among the largest gainers in major currencies against the greenback on Wednesday. Treasury two-year yields, which are more sensitive to imminent Fed moves, climbed two basis points to 4.69%.
Powell also said nearly all Fed officials expect it will be appropriate to raise interest rates “somewhat further” in 2023 to bring down inflation. “Not a single person on the committee wrote down a rate cut this year, nor do I think it is at all likely to be appropriate,” he noted, suggesting that such a decision would be a couple of years out. Bond traders reined in bets the Fed will lower interest rates this year with swap contracts pricing in a peak rate of 5.3% in September.
In Asia, investors will be focused on potential policy easing in China and retail and industrial data for May that is expected to show further slowing in the country’s sputtering recovery. Consensus forecasts predict a 10 basis point cut to China’s one-year medium-term lending facility rate on Thursday as part of broader stimulus efforts to support real estate and domestic demand.
New Zealand gross domestic product data for the first quarter is expected to show the country entered a recession faster than the central bank anticipated following an aggressive run of policy tightening.
“No rate hike this month does not necessarily mean that the Fed is finished raising rates this cycle,” said Jason Pride, chief investment officer, private wealth for Glenmede. “It is more likely that today’s decision will prove to be a ‘skip’ ahead of another rate hike at the July meeting than a prolonged pause in the rate hike campaign.”
In corporate news, Advanced Micro Devices Inc. rallied as the chipmaker showed off its planned line of artificial intelligence processors. Nvidia Corp. hit an all-time high, extending this year’s surge. Tesla Inc. fell, snapping its record-setting 13-day winning streak. UnitedHealth Group Inc. slumped after an executive said a recent increase in surgeries and other medical care might push expenses higher than anticipated.
Key events this week:
- China property prices, retail sales, industrial production, Thursday
- European Central Bank President Christine Lagarde holds press conference following the rate decision, Thursday
- US initial jobless claims, retail sales, empire manufacturing, business inventories, industrial production, Thursday
- Bank of Japan rate decision, Friday
- US University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 7:31 a.m. Tokyo time. The S&P 500 rose 0.1%
- Nasdaq 100 futures rose 0.1%. The Nasdaq 100 rose 0.7%
- Nikkei 225 futures rose 0.1%
- Hang Seng futures rose 1.4%
- S&P/ASX 200 futures rose 0.3%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.0833
- The Japanese yen was little changed at 140.05 per dollar
- The offshore yuan was little changed at 7.1752 per dollar
- The Australian dollar was little changed at $0.6799
Cryptocurrencies
- Bitcoin rose 0.6% to $25,068.29
- Ether rose 0.9% to $1,653.41
Bonds
- The yield on 10-year Treasuries declined three basis points to 3.79%
Commodities
- West Texas Intermediate crude rose 0.5% to $68.64 a barrel
- Spot gold rose 0.1% to $1,944.55 an ounce
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Rita Nazareth.