TOKYO — Asian stocks rose on Thursday, though optimism about an aggressive rate hike by the Federal Reserve was countered by some uncertainty over China’s coronavirus restrictions.
Trading in Asia was relatively subdued ahead of US markets closing for Thanksgiving. The benchmark rose in early trading in Japan, Australia and South Korea, but fell in Shanghai. Oil prices fell.
“One headwind for Asian markets is the COVID situation in China, where investors appear to be avoiding local assets and commodities as the country witnesses a near record number of COVID cases. Wider restrictions will continue to weigh on risk sentiment and macroeconomic fundamentals, weighing on the outlook for cyclical stocks and commodities,” said Anderson Alves of ActiveTrades.
The Japanese benchmark Nikkei 225 NIK, +1.10% was up 1% in morning trading following a national holiday on Wednesday. Australia’s S&P/ASX 200 XJO, +0.28% was up 0.3% and South Korea’s Kospi 180721, +0.84% was up 0.8%. The Hong Kong Hang Seng HSI, +0.33, was up 0.5%, while the Shanghai Composite SHCOMP, -0.22, was down 0.1%. Stocks fell in Singapore STI, -0.07%, but gained in Taiwan Y9999, +1.03% and Indonesia JAKIDX, +0.56%.
Stocks generally closed higher on Wall Street after minutes of the Federal Reserve’s most recent policy meeting, with central bank officials agreeing that a smaller rate hike was likely “soon.”
This suggests that policymakers are watching for signs that inflation may ease as the economy slows on more expensive borrowing.
The S&P 500 SPX, +0.59%, was up 0.6% to 4,027.26, while the Dow Jones Industrial Average DJIA, +0.28% was up 0.3% to 34,194.06. The Nasdaq Composite Comp, +0.99% was up 1% to close at 11,285.32.
Yields on long-term government bonds fell. The yield on the 10-year government bond fell from 3.76% to 3.69%, which had an impact on mortgage rates.
At their November 1 and 2 meeting, Fed officials expressed uncertainty about how long it might take for their rate hikes to slow the economy enough to keep inflation in check. At a press conference later, Chairman Jerome Powell insisted that the Fed is not even close to declaring victory in its fight to curb high inflation. Other Fed officials have indicated in the weeks following the meeting that additional hikes are still warranted.
The central bank’s benchmark interest rate is currently at 3.75% to 4%, up from near zero in March. It warned that it may eventually have to raise interest rates to previously unheard-of levels to calm the hottest inflation in decades.
Wall Street is closely monitoring the latest economic and inflation data to see if there are any signs that could allow the Fed to scale back rate hikes in the future. Investors fear that the Fed will slow down economic growth too hard and cause a recession.
Consumer spending and the labor market remain strong points in the economy so far. This has helped protect against a recession, but it also means the Fed may need to remain aggressive.
Crude oil prices fell 3.7%, weighing on energy supplies. Hayes was down 2.2%.
In energy trading, benchmark US crude oil CLF23, -0.26%, fell 11 cents to $77.83 a barrel. Brent crude BRNF23, -0.33%, the international standard, fell 16 cents to $85.25 a barrel.
In currency trading, the US dollar USDJPY fell -0.59% to 139.57 JPY from 138.85 JPY.