Asian stocks edge higher as Fed hike eases bond fears, China shares lag

Asian stocks saw a slight increase on Thursday following the Federal Reserve's first interest rate hike since 2023, according to wire service reports. This move by Chair Kevin Warsh's committee was aimed at tackling inflation, which helped ease concerns in the bond market. U.S. equity futures experienced a slight rise in Asian trading, with the Nasdaq 100 Futures up 0.6% and S&P 500 Futures increasing by 0.7%.

This occurred as Wall Street had previously fallen in response to the Fed's decision. The central bank increased its benchmark rate by 25 basis points to a range of 3.75%-4%, projecting further hikes in 2025. Money markets now price roughly a 50% chance of another rate hike in October, with a December increase already factored in.

Treasury yields experienced a slight pullback, with the two-year yield falling to 4.72% after reaching its highest level since 2024 in the previous session. DBS strategist Philip Wee noted that the Fed's decision reinforced its independence from the White House, potentially clashing with President Donald Trump's calls for lower rates.

The MSCI Asia Pacific index gained 0.4%, while South Korea's KOSPI rose 0.3% and Japan's Nikkei 225 increased by 0.4%. However, Hong Kong's Hang Seng fell 1.1%, and the CSI 300 lost 0.4%. Asian semiconductor shares experienced mixed results, with SK Hynix declining by 0.9% and Samsung Electronics remaining unchanged at 253,500 won.

Japanese Kioxia fell by 2%, Murata Manufacturing dropped 2.4%, and Largan decreased by 1.7%. This reaction followed worries about AI spending outlook and higher borrowing costs' impact on technology valuations. Chinese semiconductor shares had varying outcomes, with NAURA Technology up 0.7%, SMIC down 2.4%, and Cambrian Technologies falling 1.5%.

In Hong Kong, Z.AI surged 4.7% and MiniMax rose 5.3%, while Alibaba fell 1.5%, Tencent lost 1.6%, and Meituan dropped 2.6%. The Bank of England is expected to hold rates at its meeting, while investors will be watching for any indications of a potential November hike due to high energy prices. The Bank of Japan is anticipated to raise rates on Friday, signaling that further tightening might still be necessary.

Brent crude was trading around $105.75 a barrel, after initially falling by up to 5% on Wednesday as supply concerns eased somewhat. Saudi Arabia aims to restore half of the capacity of its East-West pipeline within days following drone attacks that temporarily shut it down last week. President Trump stated that the conflict with Iran would conclude "very soon," according to the report.

Additionally, Japan's TOPIX climbed 0.7%, Australia's S&P/ASX 200 increased by 0.3%, New Zealand's NZX 50 rose 0.9%, and Singapore's Straits Times gained 0.4%. India's Nifty 50 futures remained relatively stable, while Thailand's SET increased by 0.9%, the Philippines' PSEi rose by 0.79%, Malaysia's KLCI fell marginally, and Indonesia's Jakarta Composite traded flat.

Moving forward, the focus shifts to the Bank of England's and Bank of Japan's decisions, with market participants assessing the potential impact of the Fed's more hawkish strategy on inflation and broader economic growth.