Asian Stocks Higher After Fed Says Rate Hikes May Be Needed

Asian stock markets gained Thursday after the Federal Reserve said higher U.S. interest rates might be needed to cool inflation.

Shanghai, Tokyo and Sydney advanced. Hong Kong declined. Oil prices fell more than $1 per barrel to stay below $100.

Wall Street's benchmark S&P 500 index gained 0.4% on Wednesday after notes from the latest Fed meeting said “an even more restrictive stance could be appropriate" to get inflation back to its 2% target. 

They acknowledged that could weaken the economy.

Investors worry aggressive U.S. and European rate hikes to contain price rises that are running at a four-decade high might depress global economic activity.

“Stocks rose because runaway commodity and oil prices are sinking,” said Stephen Innes of SPI Asset Management. 

"Both are the critical targets Fed policy is engineered to tame; hence, inflation expectation is coming under control.”

The Shanghai Composite Index rose 0.1% to 3,359.16 and the Nikkei 225 in Tokyo gained 0.8% to 26,304.12. 

The Hang Seng in Hong Kong lost 0.3% to 21,527.48.

The KOSPI in Seoul climbed 1.8% to 2,333.74 and Sydney's S&P-ASX 200 was 0.3% higher at 6,613.30. New Zealand declined while Southeast Asian markets advanced.

On Wall Street, the S&P 500 rose to 3,845.08.  The Dow Jones Industrial Average gained 0.2% to 31,037.68. The Nasdaq composite added 0.3% to 11,361.85.

Fed last month raised its key interest rate by three-quarters of a point to a range of 1.5% to 1.75%, the biggest single increase in nearly three decades. 

Chair Jerome Powell suggested at that time a rate hike of one-half or three-quarters of a point, three times the Fed's usual margin, was likely when policymakers meet late this month.

Notes released Wednesday from the Fed's June 14-15 meeting confirmed other officials agreed that such an increase would “likely be appropriate.”

Inflation has been boosted by Russia's attack on Ukraine, which pushed up prices of oil and other commodities, and Chinese anti-virus controls that shut down Shanghai and other industrial centres disrupted supply chains.

Oil prices closed below $100 per barrel on Tuesday for the first time since early May but U.S. crude is still up more than 30% this year.

Benchmark U.S. crude fell $1.04 to $97.49 per barrel in electronic trading on the New York Mercantile Exchange. 

The contract lost 97 cents to $98.53 a barrel Wednesday. Brent crude, the price basis for international trading, lost $1.19 to $99.50 per barrel in London. It tumbled $2.08 the previous session to $100.69.

The dollar declined to 135.72 yen from Wednesday's 135.98 yen. The euro gained to $1.0206 from $1.0182.