Asia-Pacific equities mixed as investors look ahead to Fed rate decision

SINGAPORE – Shares in Asia-Pacific were mixed in Wednesday morning’s trading, with investors looking ahead to the US Federal Reserve’s interest rate decision expected later in the United States.

Hong Kong’s Hang Seng index lost 0.68% while shares of Tencent and Alibaba both fell about 2%.

Elsewhere, the Kospi in South Korea was up 0.1%, while the S&P/ASX 200 in Australia was up 0.19%.

MSCI’s broadest index of Asia-Pacific stocks outside of Japan changed little.

The markets in Japan and mainland China will be closed on Wednesday for the holidays.

Asian markets may see choppy trading today with market players bracing for the Fed’s rapid rate hike trajectory and the Fed’s quantitative tightening strategy, especially with Fed Chair Powell’s press conference on tap (who will share his views on recession risk and also the possibility of interest rate of 75 bps could reveal hikes),’ analysts at OCBC Treasury Research wrote in a note Wednesday.

The US Federal Reserve is expected to raise interest rates for the second time since 2018. The central bank is also expected to launch a program from June to reduce its bond holdings by $95 billion a month.

The Fed is expected to raise interest rates and aggressively lower its balance sheet over the next 16 months, and the majority of respondents in the May CNBC Fed Survey see the process leading to a recession.

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Overnight, the S&P 500 rose 0.48% to 4,175.48. The Dow Jones Industrial Average rose 67.29 points, or 0.2%, to 33,128.79. The Nasdaq Composite rose 0.22% to 12,563.76.

Currencies and Oil

The US dollar index, which tracks the greenback against a basket of its counterparts, stood at 103,459, a level below 103.6 seen earlier in the week.

The Japanese yen was trading at 130.11 per dollar after trading around 130 for much of the week so far. The Australian dollar stood at $0.7104, still above the level below $0.708 seen earlier in the week.

Oil prices were higher in the morning of trading hours in Asia, with the international benchmark Brent oil futures rising 0.64% to $105.64 a barrel. US crude oil futures rose 0.77% to $103.20 a barrel.

— Patti Domm of CNBC contributed to this report.

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