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

Asian stocks climbed on Thursday, as investors anticipated the Federal Reserve's decision to raise interest rates for the first time in over three years. The move calmed a global bond selloff that had driven long-term yields to record highs. The U.S. dollar surged to a seven-week high against its major counterparts, driven by a rise in short-term Treasury yields and expectations that the Fed may need to hike rates again by December.

Oil prices, however, retreated, pulling some support from commodities. The focus now turns to the Bank of England, widely expected to maintain rates later in the day, with the Bank of Japan almost certain to raise rates on Friday. The MSCI's Asia-Pacific index excluding Japan increased by 0.4%, while Japan's Nikkei rose 0.5%. Chinese blue-chips declined by 0.4%, and Hong Kong's Hang Seng fell 0.9%.

U.S. equity futures rose by 0.6% and 0.5%, respectively, after modest losses on Wall Street. The Fed's unanimous decision to hike rates by 0.25% indicated a hawkish stance, with one more rate increase anticipated this year. Goldman Sachs expects a second hike in October, as the market appears to have priced in three rate increases for this tightening cycle.

Treasury yields flattened, with short-term maturities suffering while long bonds gained. The two-year Treasury yield remained at 4.7145%, up from overnight spikes of 6 basis points. This helped lift the U.S. dollar to a seven-week high against currencies like the yen and euro. While Chair Jerome H. Powell's decision appeared to appease inflation concerns, the back end of the yield curve still lacks direction.

Analysts target a 5.25% level for the U.S. 10-year yield. Commodity markets suffered as oil prices fell further, Brent crude futures dropping 0.7% to $105.05 a barrel after a 2.7% overnight decline. Gold, however, rebounded 1% to $4,305 an ounce, slightly reversing overnight losses.