Asian stocks were mostly higher on Tuesday as the Federal Reserve and other central banks braced for the final barrage of interest rate hikes of the year.
Tokyo’s Nikkei 225 rose 0.4% to 27,961.66 while Hong Kong’s Hang Seng gained 0.5% to 19,559.93. Australia’s S&P/ASX 200 rose 0.3% to 7,203.30.
In Seoul, the Kospi lost 0.3% to 2,366.89. The Shanghai Composite Index was flat at 3,179.71. Stocks fell in India and Taiwan, but rose in Singapore and Bangkok.
Markets have struggled this year thanks to high inflation and interest rate hikes designed to combat it. Higher rates slow trading activity by design, but they also risk causing a recession if they rise too high, while also dragging down investment prices.
On Wall Street on Monday, the S&P 500 rose 1.4% to 3,990.56. The Dow Jones Industrial Average added 1.6% to 34,005.04. The Nasdaq rose 1.3% to 11,143.74. The Russell 2000 gained 1.2% to 1,818.61.
The indices were coming off their first weekly loss in three weeks.
Tech stocks accounted for a large chunk of market gains. Microsoft rose 2.9% and was the biggest single force to lift the S&P 500. The London Stock Exchange Group has agreed to a 10-year deal in which it will move data to Microsoft’s cloud and spend at least $2.8 billion. . Microsoft is also acquiring a 4% ownership stake in the company.
Horizon Therapeutics jumped 15.5% after Amgen announced it would acquire the biopharmaceutical company for about $26.4 billion.
The rally came ahead of a key inflation report on Tuesday and a meeting of policymakers at the Federal Reserve, after which investors expect the Fed to announce its final rate hike of the year on Wednesday following a blitzkrieg that started in March.
The Fed has hinted that it will cut the size of its rate hikes, raising expectations for a more modest 0.50 percentage point increase on Wednesday.
That would follow four consecutive mega gains of 0.75 percentage points. Each was triple the Fed’s usual move, raising the central bank’s key overnight rate to a range of 3.75% to 4% after starting the year at near zero.
Other central banks around the world are also likely to raise their own rates by half a percentage point this week, including the European Central Bank.
Goldman Sachs economists expect Fed policymakers to signal on Wednesday that their median expectation is for rates to eventually reach a range of 5% to 5.25%.
Even if inflation is declining, the global economy still faces threats from the already driven rate hikes. The housing industry and other businesses that rely on low interest rates have shown particular weakness, and concerns are growing about the strength of corporate earnings in general.
The next big milestone for the markets comes later on Tuesday with the release of the latest update on consumer inflation. Economists forecast inflation slowed to 7.3% last month from 7.7% in October.
In addition to raising short-term rates, the Fed is also taking other steps with its vast trove of bond investments that should effectively allow long-term yields to rise.
The 10-year Treasury yield, which helps set rates on mortgages and other loans, rose to 3.61% from 3.59% on Friday. The two-year yield, which tends to track more closely the Fed’s expectations, rose to 4.39% from 4.34%.
Energy producers rallied on Monday after the price of US oil rose 3%. ExxonMobil rose 2.5%.
Benchmark US crude rose $1.04 to $74.21 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the pricing basis for international trade, rose $1.15 to $79.14 a barrel.
Last week, crude oil prices hit their lowest levels of the year on concerns about a weakening global economy, which would mean lower energy demand.
In currency trading, the dollar rose to 137.69 Japanese yen from 137.68 yen. The euro rose to $1.0543 from $1.0534.
AP business writers Stan Choe and Alex Veiga contributed.