Shares tick higher as Fed hikes rates, dollar jumps with short-term yields

Asian stock markets rose on Thursday, as traders anticipated the Federal Reserve would act against inflation by raising interest rates for the first time in over three years. The U.S. dollar surged to a seven-week high after the Fed’s hike. The decision to raise rates also sent bond yields soaring. Short-term Treasury yields climbed, strengthening the dollar against major currencies like the yen and euro.

The MSCI’s Asia-Pacific share index outside Japan increased 0.4%, while Japan’s Nikkei climbed 0.5%. Chinese blue-chips slipped 0.4%, and Hong Kong’s Hang Seng fell 0.9%. Nasdaq and S&P 500 futures showed gains of 0.6% and 0.5%, respectively, after small declines on Wall Street. The Federal Reserve’s unanimous decision mirrored a hawkish stance, with officials signaling more rate hikes this year.

Goldman Sachs expects the Fed to hike rates again in October, with a 50% chance of a second increase next month. The flattening Treasury yield curve reflected short-term yields taking a hit but long bonds benefiting. The 10-year Treasury yield paused but hovered below the 5% level, signaling moderate expectations of falling inflation expectations.

Commodity markets suffered, with Brent crude futures dropping 0.7% to $105.05 a barrel, as Saudi Arabia reportedly eased concerns about Middle East supply by offering crude cargoes through Oman. Gold, however, rose 1% to $4,305 an ounce, offsetting an overnight 0.7% fall.