Hong Kong’s Hang Seng leads gains in Asia; mainland china stocks mixed

It was the pullback from a 75 basis point hike by US Fed Chairman Powell that sparked the market rally.

Lavanya Venkateswaran

Economist, Mizuho Bank

China’s service sector activity declined further in April, a private sector survey showed on Thursday. The Caixin Services Purchasing Managers’ Index (PMI) fell to 36.2 for April, below March’s reading of 42.

The 50 point mark in the PMI readings separates growth from contraction. PMI readings are sequential and represent month-to-month expansion or contraction.

Data released over the weekend also showed Chinese factory activity contracted in April as Covid lockdowns hit industrial production.

Australia’s S&P/ASX 200 climbed 0.63%, while MSCI’s broadest index of Asia-Pacific stocks outside Japan traded 1.01% higher.

Markets in Japan and South Korea are closed on Thursday.

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The US Federal Reserve on Wednesday raised its benchmark interest rate by half a percentage point, in line with market expectations. The central bank also outlined a program by which it will eventually reduce its bond holdings by $95 billion per month.

Fed Chairman Jerome Powell underscored the commitment to lower inflation, although he said a 75 basis point hike is “not something the committee is actively considering.”

Wall Street markets jumped overnight on the Fed’s decision, with the S&P 500 rising nearly 3% to 4,300.17. The Dow Jones Industrial Average jumped 932.27 points, or 2.81%, to 34,061.06. The Nasdaq Composite climbed 3.19% to 12,964.86.

“It was the pullback from a 75bp hike by US Fed Chair Powell that sparked the market rally,” Mizuho Bank economist Lavanya Venkateswaran wrote in a note.

“The market reaction, mostly pointing to a reassessment of aggressive embedded rate hikes, doesn’t take away from the Fed’s hawkish intentions,” Lavanya said.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 102.492 after a recent decline from above 103.

The Japanese yen was trading at 128.92 to the dollar, stronger than the levels above 130 seen against the greenback yesterday. The Aussie dollar changed hands at $0.7243 after a recent surge below $0.721.

Oil prices were higher in morning trading hours in Asia, with international benchmark Brent futures up 0.24% at $110.40 a barrel. U.S. crude futures climbed 0.2% to $108.03 a barrel.

— CNBC’s Jeff Cox contributed to this report.

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