SYDNEY- Asian shares made cautious gains on Thursday as investors scented a possible slowdown in the pace of US rate hikes, lowering bond yields and restraining the dollar.
As expected, the US Federal Reserve raised rates 75 basis points to 2.25-2.5 percent but did note some softening in recent data.
Fed Chair Jerome Powell sounded suitably hawkish on curbing inflation in his news conference, but also dropped guidance on the size of the next rate rise and noted that “at some point” it would be appropriate to slow down.
“The Fed no longer feel behind the curve and can now assess the appropriateness of policy ‘meeting by meeting’,” said Elliot Clarke, a senior economist at Westpac.
“This is not to say that the rate-hike cycle is complete or even that a pause is coming, but risks look as though they are transitioning from being skewed to the upside to the downside.”
The futures market still has 100 basis points of further tightening priced in by year-end, but also implies around 50 basis points of rate cuts over 2023.
Just the hint of a less aggressive Fed was enough to send MSCI’s broadest index of Asia-Pacific shares outside Japan up 0.5 percent. Japan’s Nikkei added 0.7 percent and South Korea 0.8 percent.
Yet shares of several major US tech companies, including Meta Platforms, also slid after hours as poor quarterly results and outlooks underscored recession fears.
That saw Nasdaq futures dip 0.4 percent, having enjoyed their biggest daily gain since April 2020 on Wednesday, while S&P 500 futures eased 0.2 percent.
Attention now switches to data on US gross domestic product for the second quarter where another negative reading would meet the technical definition of a recession, though the United States has its own method of deciding those.
Median forecasts are for growth of 0.5 percent, but the closely-watched Atlanta Fed estimate of GDP is for a fall of 1.2 percent. – Reuters
