EconomyPrice AnalysisStocks

Stock Prices Across Asia Increases As Investors Braces Themselves For High Bank Rates

The global economies keep battling rising inflation by hiking the interest rates. Most stock prices, however, gained as the markets braced themselves up for the possible increase in bank rates to be announced by the US Federal Reserve this week.

Investors Braces For Rate Hike

On Tuesday, Asian stocks rose during the late hours of New York trading. The stock markets seem to have priced in the anticipated rate increase by the apex bank in the United States in their quest to fight inflation.

Most investors in the stock market are keeping tabs on the activities of the US Federal Reserve as they seem to be shaping market sentiment. 

Zhang Zihua, who works as a chief investment officer in Beijing Yunyi Asset Management, stated that the market might not be affected by any increase in the rates that is below 0.75%. 

He further explained that traders had braced themselves for hikes around that range. Zihua also said the market could recover provided the Federal Reserve’s rate doesn’t exceed investors’ expectations.

Increase In Stock Prices

The S&P 500 e-mini stock futures increased by 0.22%. The Euro Stoxx 50 similarly gained by 0.37% in the European markets. The German DAX and FTSE futures also recorded increases of 0.53% and 0.61%, respectively. Again, there was a 1.2% gain in Australian stocks.

In the Asian markets, the technology shares mainly pushed Nikkei to 0.48% after the Japanese national break. The CSI 300 index in China shows a 0.2% rise while Asia-Pacific’s MSCI broad index, excluding Japan, jumped by 1.2%.

On Monday, the Nasdaq Composite and S&P 500 recovered from their lowest drops in June. Nasdaq, Dow Jones Industrial Average, and the S&P increased by 0.76%, 0.64%, and 0.69%, respectively, as traders in the market expected a 0.75% increase after the Federal Reserve’s policy meeting this month.

Meanwhile, markets braced for a 4.5% high bank rate at the beginning of 2023, contrary to the current policy rate range of 2.25% – 2.5% by the Federal Reserve.

Government bonds recorded a sell-off yesterday due to hiked interest rates. The yield of the 10-year Treasury notes also drops to 3.4848% from Monday’s 3.518%, which was the highest over ten years. The two-year yield, which is used as a measure for future expected inflation, also dropped to 3.9473% from 3.970%, which is the highest in over 14 years.

Increased Bank Rates Expected From Other Central Banks

Most apex banks across Europe, Asia, and Africa are expected to increase their interest rates. However, it is uncertain whether the Bank of England will hike its interest rate by 0.5% or 0.75%.

However, China plans to continue supporting its economic recovery by cutting a repo rate by 0.10%. The Bank of Japan appears to continue its ultra-easy yield curve policy in its scheduled meeting this week, even though Yen drops in value.

Meanwhile, the Dollar index shows a 0.046% increase at 109.56 compared with the other six currencies. The New Zealand Dollar dropped to $0.5923, a record 0.5% low since May 2020.

Also, spot gold dropped slightly to $1.671.94 per ounce while Brent and US crude increased to $92.12 and $85.76 per barrel, respectively.

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