Asia report: Stocks rise ahead of Fed meeting as oil prices retreat
Asian stock markets advanced on Wednesday as oil prices pulled back from a four-month high, while chip and AI-related shares rebounded after a brutal sell-off.
The Nikkei 225 finished 0.7% higher, helped by Japanese bond yields retreating from a 30-year high. Stocks also gained in Hong Kong and Shanghai, up 0.2% and 0.7% respectively, while South Korea's benchmark index jumped 1.4%.
“European and Asian stock markets enjoyed a solid bounce on Wednesday as investor sentiment picked up amid a pullback in the oil price,” says Russ Mould, investment director at AJ Bell.
Brent was down 0.9% at $107.77 after settling at $108.75 on Tuesday, its highest closing price since mid-May, as threats to Saudi exports grew after increasing attacks by Iran-backed Houthi rebels on Red Sea facilities.
Crude's retreat, albeit moderate, provided "some much-needed relief to the market following an intense period that fired up inflation worries", Mould said.
"The dip in the commodity price might not be enough to steer the Federal Reserve on a different path though. It is widely expected to raise interest rates today, with the first of potentially two or three hikes over the next six months," he said.
The Federal Open Market Committee meeting is set to conclude at 1900 BST Wednesday, with policymakers predicted to raise the Federal Funds Rate by 25 basis points to the 3.75-4.0% range, marking the first hike since 2023.
Markets are also pricing in a 25bp rate hike in Japan this week, ahead of the Bank of Japan's monetary policy vote on Friday. Borrowing costs are already at their highest level – 1.0% – since September 1995, following a 25bp increase in June.
Japanese bond yields retreated slightly on Wednesday, falling 4.2bp to 3.0% after hitting 3.042% the previous session, its highest level since 1996.
In economic news, Japanese exports were up 19.3% year-on-year in August, easing from 23.2% growth in July but ahead of the 18.2% forecast, helped by strong demand for AI semiconductors. Imports also rose strongly, up 28% from a year earlier, more or less in line with the 27.9% jump the month before and ahead of the 26.3% estimate.
In equity news, chip stocks bounced back, including China's MiniMax and Z.AI, Japan's Tokyo Electron and South Korea's Samsung Electronics and SK Hynix.
SK Hynix was making headlines after settling a dispute with its labour union, giving employees more choice over how bonuses are paid. The deal increases the amount that can be paid in cash, and reduces the amount paid out in stock, among other changes.