TOKYO – Asian shares were mostly higher Monday, as investors were relieved by the head of the Federal Reserve indicating it will “proceed carefully” on interest rates.
Japan’s benchmark Nikkei 225 added 1.8% in afternoon trading to 32,195.91. Australia’s S&P/ASX 200 gained 0.6% to 7,159.80, after data on Australian retail sales showed they rose a higher than expected 0.5%.
South Korea’s Kospi rose 0.8% to 2,538.67. Hong Kong’s Hang Seng jumped 1.3% to 18,182.87, while the Shanghai Composite surged 1.3% to 3,104.27.
“The muted reaction of treasury yields to the rhetoric from Jackson Hole shows that US Federal Reserve chairman Jerome Powell probably hit the right tone when it comes to keeping further policy tightening on the table but at the same time not rattling market confidence,” said Tim Waterer, chief market analyst at KCM Trade.
Wall Street recorded its first winning week since July, with the S&P 500 climbing 29.40, or 0.7%, to 4,405.71. The index had flipped between small gains and losses a few times through the day.
The Dow Jones Industrial Average rose 247.48 points, or 0.7%, to 34,348.90, and the Nasdaq composite gained 126.67, or 0.9%, to 13,590.65.
In a highly anticipated speech, Powell said Friday that the Federal Reserve will base upcoming interest rate decisions on the latest data about inflation and the economy. He said while inflation has come down from its peak, it’s still too high and the Fed may raise rates again, if needed.
Some had hoped Powell would say the Fed was done with its hikes to interest rates. Higher rates work to control inflation, but at the cost of slowing the economy and hurting prices for investments.
But Powell also took care to say he’s aware of the risks of going too far on interest rates and doing “unnecessary harm to the economy.” Altogether, the comments weren’t very different from what Powell said before, analysts said.
The Fed has already hiked its main interest rate to the highest level since 2001 in its drive to grind down high inflation. That was up from virtually zero early last year.
The much higher rates have already sent the manufacturing industry into contraction and helped cause three high-profile U.S. bank failures. They’ve also helped to slow inflation, but a string of stronger-than-expected reports on the economy has raised worries that upward pressure remains. That could force the Fed to keep rates higher for longer.
Such expectations in turn vaulted the yield on the 10-year Treasury this week to its highest level since 2007. It ticked down to 4.23% Friday from 4.24% late Thursday, though it’s still up sharply from less than 0.70% three years ago.
High yields mean bonds are paying more interest to investors. They also make investors less likely to pay high prices for stocks and other investments that can swing more sharply in price than bonds. Big Tech and other high-growth stocks tend to feel such pressure in particular.
The two-year Treasury, which more closely tracks expectations for the Fed, rose to 5.07% Friday from 5.02% late Thursday. Traders see better than a 50% chance the Fed will hike its main interest rate again this year. That’s up sharply from just a week ago, according to data from CME Group.
In energy trading, benchmark U.S. crude edged up 18 cents to $80.01 a barrel. Brent crude, the international standard, rose 10 cents to $84.58 a barrel.
In currency trading, the U.S. dollar fell to 146.38 Japanese yen from 146.40 yen. The euro cost $1.0819, up from $1.0798.
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