Asian shares rise above us, ahead of expected Fed rate hike
Asian stocks were mostly higher on Tuesday, as Wall Street closed higher following a delayed buying spree following recent losses as investors await another interest rate hike by the US Federal Reserve.
Markets have been worried whether the Fed’s plan to reduce the hottest US inflation in four decades could be too aggressive and push the economy into a recession by pumping the brakes on growth too hard.
Japan reported that its consumer inflation jumped in August to 3.0%, its highest level since November 1991, but well below the 8% plus reading in the US, core inflation, excluding volatile food prices fresh, increased by 2.8%. The Bank of Japan will hold a two-day monetary policy meeting later this week, although analysts expect the central bank to stick to its easy monetary policy.
“Expectations are that easy monetary policies will remain in the next meeting this week. BOJ Governor Haruhiko Kuroda previously mentioned that he wanted to see ‘sustainable and sustained growth’ in both wages and prices before considering any policy changes,” Yeap Jun Rong said in a report , a market strategist at IG in Singapore.
Japan’s benchmark Nikkei 225 added 0.4% in morning trading to 27,672.59. Australia’s S&P/ASX 200 jumped 1.2% to 6,797.30. South Korea’s Kospi added 0.5% to 2,368.09. In China, where the key lending rate was unchanged, the Shanghai Composite added 0.5% to 3,130.86. Hong Kong’s Hang Seng added 1.3% to 18,810.35.
On Monday, Wall Street indexes fluctuated between modest gains and losses for most of the day before a burst of buying in the final hour of trading. The S&P 500 rose 0.7%, recovering from a 0.9% slide. It closed at 3,899.89.
The Dow Jones Industrial Average rose 0.6% to 31,019.68 and the Nasdaq Composite climbed 0.8% to 11,535.02.
Technology stocks, retailers, banks and industrial companies helped lift the market. Apple rose 2.5%, Home Depot gained 1.6%, Bank of America rose 1.7% and United Airlines closed 3.3% higher.
Health care and real estate stocks fell, dampening gains elsewhere in the market. Pfizer fell 1.3% and Welltower fell 2.2%.
The 2-year Treasury yield, which tends to track expectations for Fed action, rose to 3.94% from 3.87% late Friday. The 10-year yield, which influences mortgage rates, rose to 3.49% from 3.45%.
Shares of smaller companies also gained ground. The Russell 2000 closed 0.8% higher.
Trading volumes were lower than usual, a sign that most traders are wary of making big changes ahead of the Fed’s policy announcement Wednesday afternoon, said Scott Ladner, chief investment officer at Horizon Investments.
“No one really wants to be positioned in front of him,” he said. “It’s been such a slippery market on both the upside and the downside.”
The US market is having its worst week in three months after a surprisingly tepid report on inflation and major companies, including FedEx, warning of worsening trends in the economy.
Investors will get another update on the housing sector on Wednesday when the National Association of Realtors releases August numbers for previously occupied home sales.
Average long-term US mortgage rates climbed above 6% last week for the first time since the housing crash of 2008. Higher rates could make an already tight housing market even more expensive for US buyers.
In energy trading, U.S. benchmark crude gained 5 cents to $85.41 a barrel in electronic trading on the New York Mercantile Exchange. It rose 60 cents to $85.36 a barrel on Monday.
Brent crude, the international benchmark, rose 13 cents to $92.13 a barrel.
In currency trading, the US dollar fell to 143.20 Japanese yen from 143.22 yen. The euro rose to USD 1.0030 from USD 1.0024.