Asian stocks climb as Fed sees inflation improve

BEIJING (AP) — Asian stock markets gained on Thursday after the Federal Reserve said the US economy was moving toward lower inflation, but further interest rate hikes are expected.

Shanghai, Tokyo, Hong Kong and Sydney advanced. Oil prices have risen.

Wall Street’s benchmark S&P 500 index closed 1% higher on Wednesday after the Fed raised its key lending rate by 0.25 percentage point, a narrower margin than previous hikes. Chairman Jerome Powell said “the disinflation process has begun” but “continuous hikes” in rates will be needed.

Traders are hoping that lower inflation following repeated rate hikes by global central banks will encourage them to scale back plans for further hikes. Some expect a cut in the US before 2024, though Powell said he doesn’t expect any cuts this year.

Markets gave a “dovish interpretation” to Powell’s comments despite his warning that it was too early to declare victory, Mizuho Bank’s Venkateswaran Lavanya said in a report.

The gap between market prices and Fed plans “appears to have widened,” Lavanya wrote. “That leaves room for a rude shock down the road.”

The Shanghai Composite Index gained less than 0.1% to 3,287.29 and Tokyo’s Nikkei 225 index gained 0.2% to 27,391.85. Hong Kong’s Hang Seng advanced 0.3% to 22,128.78.

Seoul’s Kospi rose 0.6% to 2,463.20 and Sydney’s S&P-ASX 200 rose 0.2% to 7,513.80.

New Zealand and Jakarta advanced while Singapore and Kuala Lumpur declined.

Following Powell’s press conference, the S&P rallied from an initial loss to climb to 4,119.21, its highest close since August.

This seemed to encourage investors who fear that the Fed and European central banks might be willing to push the global economy into a recession to cool inflation which is near multi-year highs.

“We can now say, I think for the first time, that the disinflationary process has begun,” Powell said. He said his “base case” is that the Fed’s 2% inflation target can be achieved “without a really significant recession or a really big rise in unemployment.”

The Dow Jones Industrial Average gained less than 0.1% to 34,092.96. The Nasdaq Composite jumped 2% to 11,816.32.

Wednesday’s announcement lifted the Fed’s overnight lending rate to a 16-year high from 4.5% to 4.75%, up from near zero early last year.

Wednesday’s data provided a mixed picture of the US labor market, a factor in inflation expectations.

Hiring has remained resilient despite repeated rate hikes. While this helps workers, it raises concerns that wage hikes could add upward pressure on prices.

Private payrolls increased by 106,000 in January, according to ADP, a payroll processor. This was a smaller gain than the previous month and below forecasts.

A separate US government report indicated increased strength. It said the number of job postings it rose to 11 million in December, better than expected.

In energy markets, benchmark US crude oil rose 66 cents to $77.07 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.46 to $76.41 on Wednesday. Brent crude, the price basis for international oil trade, gained 61 cents to $83.45 a barrel in London. It lost $2.62 the previous session to $82.84 a barrel.

The dollar fell to 128.55 yen from 128.77 yen on Wednesday. The euro climbed to $1.1018 from $1.0979.

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