BANGKOK – Asian shares were mostly higher Thursday after the U.S. Federal Reserve indicated it may not need to pump the brakes any harder on Wall Street and the economy.
Japan's benchmark Nikkei 225 gained 1.1% in afternoon trading to 31,950.61. Australia's S&P/ASX 200 jumped 0.9% to 6,899.70. South Korea's Kospi surged 1.8% to 2,341.96.
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Hong Kong's Hang Seng added 0.9% to 17,246.87, while the Shanghai Composite edged 0.3% lower to 3,015.33.
“It’s no surprise that Asian markets are responding positively to the gains in U.S. stocks and bonds after the Federal Reserve suggested its policy tightening cycle may be reaching the end of the runway. So maybe it is time to start engineering that elusive soft landing officially,” Stephen Innes, managing partner at SPI Asset Management, said in a commentary.
In Japan, Prime Minister Fumio Kishida announced an economic stimulus package worth about $113 billion that is meant to cushion the blow to household budgets from rising inflation and timed to counter weakening public support for his government. The package includes tax breaks for individuals and companies and subsidies to reduce rising energy costs.
Stocks climbed as Treasury yields eased in the bond market after the Fed announced its decision to hold interest rates steady, as expected. The Fed has already yanked the overnight rate from nearly zero early last year to its highest level since 2001, above 5.25%.
Longer-term Treasury yields have in turn been rising rapidly, with the 10-year Treasury yield topping 5% last month to reach its highest level since 2007.
The 10-year yield was at 4.72% early Thursday, down from 4.92% late Tuesday.
Fed Chair Jerome Powell said the central bank is unsure that its main interest rate is high enough to ensure high inflation will move down to its 2% target. That kept alive the possibility of more hikes by the Fed. He also said the Fed is not considering cuts to interest rates, which can act like steroids for financial markets.
But Powell acknowledged that a recent run higher in longer-term Treasury yields, and the tumble in stock prices that helped cause, are working on their own to slow the economy and could be starving high inflation of its fuel. If they can do that persistently, he indicated they could help the Fed whip inflation without requiring more rate hikes.
The jump in yields has already brought the average 30-year fixed mortgage rate to nearly 8%, for example, “and those higher costs are going to weigh on economic activity to the extent this tightening persists."
The Fed has time to assess the full effects of its past rate hikes, he said.
“It takes time, we know that, and you can’t rush it,” Powell said.
All together, Powell’s comments were “dovish enough” for financial markets, according to Yung-Yu Ma, chief investment officer for BMO Wealth Management. “Dovish” is what Wall Street calls an inclination to keep interest rates easier, and Ma expects the Fed won’t hike rates any more.
On Wall Street, the S&P 500 rose 1.1% to 4,237.86 and the Dow Jones Industrial Average gained 0.7% to 33,274.58. The Nasdaq composite jumped 1.6% to 13,061.47.
High yields knock down prices for stocks and other investments while making borrowing more expensive for nearly everyone. That slows the economy and puts pressure on the entire financial system.
U.S. employers were advertising slightly more job openings at the end of September than economists expected, a report said Wednesday. The Fed has been hoping for softening there, which could take pressure off inflation without requiring many layoffs.
Big Tech stocks were winners Wednesday, along with other high-growth stocks typically seen as the biggest beneficiaries of easier interest rates.
Chipmaker Advanced Micro Devices rose 9.7% after it reported stronger profit and revenue for the latest quarter than forecast.
In other trading Thursday, benchmark U.S. crude added 78 cents to $81.22 a barrel. Brent crude, the international standard, gained 76 cents to $85.39 a barrel.
The U.S. dollar edged down to 150.45 Japanese yen from 150.96 yen. The euro cost $1.0600, up from $1.0570.