Asia report: Most markets rise after US Fed decision

Asia-Pacific markets mostly saw gains on Thursday, after the US Federal Reserve decided to hold the federal funds rate steady at 5.25% to 5.5%.

The Fed also updated its ‘dot plot’ overnight, indicating only one rate cut this year, down from the three previously projected in March, while projecting a more aggressive rate cutting path in 2025, with four cuts totaling a full percentage point.

“Asian stocks surged, and bond yields declined as investors assessed the impact of moderating US inflation in contrast to the Federal Reserve's more aggressive stance,” said TickMill market analyst Patrick Munnelly.

“Japanese stocks lagged behind, and the yen slightly weakened against the dollar as the Bank of Japan commenced its two-day policy meeting.

“During the US session, Wall Street experienced a strong rally, with the dollar and Treasury yields falling sharply.”

Munnelly said that was in response to the CPI report, which revealed that core prices had grown at their slowest annual pace in over three years last month.

“Investors seem to believe that despite the Fed's rate outlook, the mild US inflation will lead to gains in Asian equities, and possibly in Europe as well.

“The initial surprise at the projection of only one US rate cut this year, despite a very low CPI reading, was lessened by Fed chair Jay Powell's remarks that many officials were undecided about a second rate cut and had only added an extra one for 2025.

“With the focus still on data dependence, the US producer price readings later today will be closely watched.”

Most markets in the green after US inflation, Fed decision

In Japan, the Nikkei 225 fell by 0.4% to close at 38,720.47, and the Topix index dropped 0.89% to 2,731.78.

Major decliners on Tokyo’s benchmark included Mitsubishi Electric, which plunged 4.42%, T&D Holdings, down 4.33%, and Sumitomo Chemical, which decreased by 4.27%.

Chinese markets also saw a decline, with the Shanghai Composite down 0.28% to 3,028.92 and the Shenzhen Component dropping 0.69% to 9,206.24.

Guizhou BC&TV Information Network Co led the losses in Shanghai, plummeting 7.18%, followed by Dashenlin Pharmaceutical Group, down 6.32%, and Guangdong Champion Asia Electronics, which fell 6.31%.

Hong Kong's Hang Seng Index rose by 0.97% to 18,112.63.

Leading the gains were BYD Co, which surged 5.82%, ENN Energy, up 4.44%, and Techtronic Industries, which increased by 4.24%.

South Korea's Kospi index climbed 0.98% to 2,754.89, as Posco International saw a significant rise of 20.11%, followed by Kogas with a 13.1% gain, and Samsung Card, which rose 11.45%.

In Australia, the S&P/ASX 200 increased by 0.44% to 7,749.70.

Codan led the gains with a 6.65% rise, followed by Abacus Storage King, up 5.13%, and Tuas, which gained 4.6%.

New Zealand's S&P/NZX 50 rose by 1.11% to 11,872.64, with top performers in Wellington including Tourism Holdings, up 4.35%, Pacific Edge, which increased by 4.26%, and A2 Milk Company, up 3.68%.

In currencies, the dollar was last up 0.34% on the yen to trade at JPY 157.26.

The greenback meanwhile rose 0.23% against the Aussie to AUD 1.5041, and by 0.17% on the Kiwi to change hands at NZD 1.6194.

On the oil front, prices saw slight declines, with Brent crude last down 0.12% on ICE to $82.50 per barrel, and the NYMEX quote for West Texas Intermediate decreasing 0.15% to $78.38.

Unemployment rate meets expectations in Australia

In economic news, Australia's unemployment rate eased to 4% in May, according to the Australian Bureau of Statistics (ABS).

That slight decrease from April's 4.1% met economists' expectations.

The economy added a net 39,700 jobs last month, surpassing the predicted increase of 30,000 jobs.

Full-time positions, defined as roles requiring 35 hours or more per week, saw a significant rise of 41,700, while part-time jobs fell by approximately 2,000.

The labour market data is closely monitored by the Reserve Bank of Australia (RBA) as it aims to control inflation while preserving the employment gains achieved since the Covid-19 disruptions.

Both the RBA and the Treasury were projecting the unemployment rate to remain at 4% next month, before increasing to around 4.3% by June 2025.

A rapid rise in unemployment could prompt the RBA to consider a near-term interest rate cut, while continued robust job growth might lead to another rate hike to prevent inflation from resurging.

Elsewhere, investors in China were awaiting the latest data on new yuan-denominated loans, expected to be released after market close.

Analysts forecast new lending in May to reach CNY 1,300 billion, a significant increase from April's CNY 730 billion.

Reporting by Josh White for Sharecast.com.