TOKYO- Japan and Hong Kong led a jump in regional stocks on Thursday, joining a rally on Wall Street overnight as potential risks from Federal Reserve monetary tightening to the Ukraine war and a slowdown in China became less murky.
Treasury yields eased a little after spiking to nearly three-year highs overnight – with shorter-end yields rising more to flatten the curve – after the Fed raised the policy rate for the first time since 2018. The Fed increased rates by an as-expected quarter point and telegraphed equivalent hikes at every meeting for the remainder of this year to aggressively stamp out inflation.
The safe-haven dollar, though, remained on the back foot and oil also stabilized well south of recent multi-year highs amid signs of material progress in talks between Russia and Ukraine to end a three-week-old invasion that Moscow says is a “special military operation” to demilitarize its neighbor.
Meanwhile, investor concerns about a sharp slowdown for China, which is battling a spreading COVID-19 outbreak with ultra-restrictive measures, were assuaged on Wednesday after Vice Premier Liu He signalled more stimulus to support markets.
Japan’s Nikkei soared 3.0 percent and touched a two-week high in Thursday’s session, while South Korea’s Kospi jumped 1.6 percent and Australia’s benchmark added 1.4 percent.
Chinese blue chips gained 2.1 percent, and Hong Kong’s Hang Seng surged 5.2 percent.
An MSCI index of regional shares rallied 2.5 percent.
US stock futures Escv1 pointed to a 0.3 percent decline at the restart, but following a 2.2 percent surge for the S&P 500 .SPX overnight.
Stocks stayed strong despite the Fed’s more hawkish tilt because Chair Jerome Powell “emphasised that the economy was strong enough to withstand hikes, saying he wasn’t concerned by the possibility of a recession,” National Australia Bank economist Taylor Nugent wrote in a client note. – Reuters
