Asian equities were varied after the Federal Reserve hiked interest rates to a 22-year high and indicated that further tightening would be “data dependent.”
Stocks in Japan fluctuated while those in South Korea and Australia gained. Hong Kong stocks futures rose, along with an index of US-listed Chinese stocks.
Samsung Electronics Co. Ltd.’s shares gained after the company reported earnings for the second quarter that beat estimates, another signal that global tech spending is beginning to climb out of a post-Covid funk. Samsung’s results came a day after smaller rival SK Hynix Inc. reported better-than-expected sales.
US stock futures edged slightly higher after stocks rebounded Wednesday from session lows, with the Dow Jones Industrial Average notching its 13th straight advance — the longest winning run since 1987.
The dollar and yields on the two-year Treasury steadied after the latter dropped in the previous session on the Fed’s rate decision. The yen inched lower as traders await the Bank of Japan’s policy decision on Friday and any hint of a shift in its yield-curve control policy.
There was something for both bulls and bears in Fed Chair Jerome Powell’s remarks, but the market finished the US session betting the central bank’s next move would possibly be a skip.
Swaps referencing future Fed decisions priced in slightly lower odds of another increase this year, which ebbed to 47%. With Fed officials fine-tuning their effort to further quell inflation, Powell said it was still “certainly possible” they hike again in September.
“With the Fed’s data dependent message and risks of a yield-curve control adjustment by the BOJ, we should see some moderate downward pressure on dollar-yen going into the BOJ meeting,” said Vassili Serebriakov, an FX and macro strategist at UBS in New York.
Kristina Clifton, a senior economist and strategist at Commonwealth Bank of Australia, cautioned that dollar-yen could be volatile over the next few days.
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Chamath de Silva, senior portfolio manager at BetaShares Holdings:
“The decision didn’t deliver a whole lot of answers, and despite a bit of chop around the Q&A, US equities didn’t have a whole lot to work with, so neither will Asia. I’m not expecting major moves on the back of it.”
Takashi Ito, senior strategist at Nomura Securities:
“Investor turns to pay attention to the BOJ’s monetary policy meeting after the expected result came out from FOMC last night. If I had to say, it can be a sense of relief for Japanese equities that the Fed is following the scenario of no recession that the market had factored in ahead of time.”
Amy Xie Patrick, head of income strategies at Pendal Group:
“There weren’t any great surprises so there’s been no material movement in rates as a whole. The end of the Fed hiking cycle should mean a spell of lower vol and potentially grind lower in yields for the Asian markets that have typically been correlated to the US.”
Hebe Chen, analyst at IG Markets Ltd.:
“In the short-term perspective, Asian currencies are likely to benefit from a projected weakening greenback, while Asian stocks may face more competition if US stocks are projected to preserve their strong momentum guided by the Fed’s dovish turn.”
Another driver of trading Wednesday was the large batch of earnings reports, with results from big tech being highly scrutinized after the shares notched a historic advance in the first six months of the year.
In late trading, Facebook parent Meta Platforms Inc. climbed after projecting revenue that beat estimates, while EBay Inc. fell on a disappointing profit outlook.
“Big tech earnings have been very Darwinian, and investors are only rewarding the companies that truly post strong results,” David Bahnsen, chief investment officer at the Bahnsen Group. “After extreme gains so far this year in big tech stocks, we have now moved to a phase where each company’s stock price is very non-correlated to one another.”
In commodities, oil climbed and gold was little changed.
Key events this week:
- China industrial profits, Thursday
- ECB rate decision, Thursday
- US GDP, durable goods orders, initial jobless claims, wholesale inventories, Thursday
- Japan Tokyo CPI, Friday
- BOJ rate decision, Friday
- Eurozone economic confidence, consumer confidence, Friday
- US consumer income, employment cost index, University of Michigan consumer sentiment, Friday
Some of the main moves in markets:
Stocks
- S&P 500 futures rose 0.1% as of 9:40 a.m. Tokyo time. The S&P 500 was little changed
- Nasdaq 100 futures rose 0.3%. The Nasdaq 100 fell 0.4%
- Hang Seng futures rose 0.9%
- Nikkei 225 futures (OSE) rose 0.2%
- Japan’s Topix was little changed
- Australia’s S&P/ASX 200 rose 0.7%
- Euro Stoxx 50 futures rose 0.2%
Currencies
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1082
- The Japanese yen fell 0.1% to 140.44 per dollar
- The offshore yuan was little changed at 7.1480 per dollar
- The Australian dollar rose 0.1% to $0.6765
Cryptocurrencies
- Bitcoin fell 0.9% to $29,331.24
- Ether fell 0.6% to $1,868.95
Bonds
- The yield on 10-year Treasuries was little changed at 3.87%
- Australia’s 10-year yield declined two basis points to 3.98%
Commodities
- West Texas Intermediate crude rose 0.3% to $79 a barrel
- Spot gold was little changed
This story was produced with the assistance of Bloomberg Automation.
--With assistance from Georgina McKay, Matthew Burgess and Yasutaka Tamura.
