As the Federal Reserve chairman's remarks reassured investors about the anticipated rate increase, Asian benchmarks are gaining amid advances on Wall Street.
Japan (AP) — Friday saw increases for Asian benchmarks, boosted by advances on Wall Street as the Federal Reserve chairman's remarks reassured markets about the impending rate hike.
The benchmark Nikkei 225 index for Japan increased 0.4% to 28,181.50 in morning trading. S&P/ASX 200 Australia increased 0.5% to 6,881.30. Shanghai Composite gained 7% to 3,256.79, while Hong Kong's Hang Seng increased 2.3% to 19,282.70. Due to a holiday, trading was suspended in South Korea.
Yeap Jun Rong, market strategist at IG in Singapore, said that the continued improvement in the risk environment "could provide a positive backdrop for the Asia session to end the week, even though Chinese equities still seem to be having some difficulty tapping on the improved environment for some relief."
More economic numbers from China are anticipated to be released next week. The impact of China's zero-COVID policy on the world's second-largest economy has generated a lot of interest.
Due to the European Central Bank's largest-ever rate increase to combat inflation, investors are also keeping a watch on interest rates. The action is consistent with the U.S. Federal Reserve's and other central banks' recent actions.
Jerome Powell, the chair of the Fed, also spoke to investors, reiterating the resolve of the institution to maintain high-interest rates for as long as required to bring inflation under control. Some market analysts remain wary.
According to Clifford Bennett, chief economist at ACY Securities, "it might be wiser to maintain rates at slightly stimulatory levels to help offset the general economic pain rather than adding to it given the tremendous challenges ahead on the energy front, the war front, and with broad-based inflation already impacting people's lives."
The major indexes were on track for their first weekly rise in four weeks as Wall Street's stocks recovered. To reach 4,006.18, the S&P 500 increased 26.31 points, or 0.7%. The Dow closed at 31,744.52 after swinging from a 259-point loss to a 193.24-point gain. To 11,862.13, the Nasdaq increased by 70.23 points. Stocks of smaller companies increased following a brief slump. To reach 1,846.91, the Russell 2000 increased 14.90 points realized 0.8%.
Since the Federal Reserve said it will not be relenting on interest rate increases anytime soon to combat the greatest inflation in decades, stocks have largely been losing momentum. Investors now place a lot of attention on the interest rate policies of the Fed and other central banks, which also have a significant impact on the stock and bond markets.
Powell stated at a conference on monetary policy hosted by the Cato Institute, a think tank that supports libertarian ideas, that the Fed would keep rates high "until the job is done" in bringing inflation back down to its 2% target. This was the same day that the European Central Bank announced its significant rate increase.
According to Powell, there has been a history of unsuccessful attempts to control inflation, which has simply increased the overall costs to society.
The Federal Reserve has already increased interest rates four times this year, and the markets anticipate one more substantial rate increase of three-quarters of a percentage point at their next meeting in two weeks.
Sam Stovall, the chief financial analyst at CFRA, said Powell "sounded quite committed in the (Fed's) goal to quash inflation, and as a result probably gave greater credence to the probability of a 75-basis point boost at the September meeting.
The markets, however, "swung back after investors realized that he wasn't expressing anything different than what he had said before," he claimed.
One of the main concerns of the Fed is that firms and households may start to anticipate that inflation would remain high over the long run, which may prompt them to start making purchases that fuel an inflationary cycle that is difficult to break.
It's still unclear if the inflation that is wreaking havoc on economies around the world is a one-time effect of the pandemic or the beginning of something more enduring.
As traders considered Powell's comments and the ECB's rate move, bond rates generally increased. The two-year Treasury yield increased from 3.44% to 3.52%, generally following expectations for Fed action. Mortgage and other loan interest rates are influenced by the yield on the 10-year Treasury, which increased to 3.32% late Tuesday from 3.27%.
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Benchmark U.S. crude increased 27 cents to $83.81 a barrel in the energy market. The benchmark crude, Brent, increased by 44 cents to $89.59 a barrel.
The American dollar dropped in currency trading from 144.09 Japanese yen to 143.64 yen. The price of the euro increased from $1.0002 to $1.0071.
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