Asian benchmarks higher as markets await Fed rate moves

TOKYO (AP) — Asian shares were mostly higher Wednesday ahead of a decision by the U.S. Federal Reserve on an interest rate increase to curb inflation.

Oil prices rose more than $1 a barrel and U.S. futures were also higher. Stocks ended lower on Wall Street after an unexpectedly strong report on the job market raised concerns the Fed will keep the pressure on inflation with big rate increases.

Chinese benchmarks extended gains after strong advances a day earlier driven by speculation the government might be preparing to gradually relax stringent COVID-19 restrictions. Since that was not followed by any official confirmation, the enthusiasm could quickly fade.

Hong Kong’s Hang Seng rose 0.6% to 15,554.91 while the Shanghai Composite index added 0.5% to 2,983.76.

Japan’s benchmark Nikkei 225 was up less than 0.1% at 27,685.42. Australia’s S&P/ASX 200 added 0.3% to 6,999.90. South Korea’s Kospi was up less than 0.1% at 2,336.44, erasing gains that came earlier in the morning.

South Korea’s export growth fell in October as demand from China fell. But the Bank of Korea’s minutes for a policy meeting last month showed a “hawkish theme of bringing inflation under control against dovish surprise by two dissents,” according to the Bank of America.

“Sentiments in the Asia session could largely hold on to some wait-and-see as well, but eyes will remain on Chinese equities after its stellar performance yesterday,” said Yeap Jun Rong, market strategist at IG in Singapore.

The Fed is beginning a two-day policy meeting Wednesday that’s expected to yield its sixth interest rate increase of the year as the central bank fights the worst inflation in four decades. The widespread expectation is for the Fed to push through another increase that’s triple the usual size, or three-quarters of a percentage point.

The S&P 500 fell 0.4% to 3,856.10 after having been up as much as 1% shortly after trading opened. The Dow Jones Industrial Average fell 0.2% to 32,653.20 and the Nasdaq composite dropped 0.9%, to 10,890.85. The Russell 2000 rose 0.3% to 1,851.39.

Big technology stocks were the biggest weights on the market. Their big valuations give them more heft in pushing the broader market up or down. Also, rising interest rates tend to make the sector look less attractive because of those high valuations. Apple fell 1.8%.

Communication services stocks, retailers and other companies that rely on consumer spending also helped drag down the overall S&P 500, keeping gains in banks, energy firms and other sectors of the market in check.

The Labor Department reported that U.S. job openings rose unexpectedly in September, suggesting the labor market is not cooling as fast as the Fed hoped for as it tries to slow economic growth.

“That really fuels the expectation that the Fed has to do more hiking,” said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management. “The labor market is still too tight for the Fed.”

Long-term Treasury yields turned higher after the report in job openings came out and rose back near multiyear highs. Those high rates have helped push mortgage rates above 7% this year.

The yield on the 10-year Treasury rose to 4.05% from 3.93% earlier in the morning. The yield on the two-year Treasury, which tends to reflect market expectations of future moves by the Fed, rose to 4.54% from 4.40%.

“The issue for investors is figuring out how long the hiking cycle will last,” Draho said. “(Fed Chair Jerome) Powell will want to leave all options on the table.”

Earnings remain a big focus for investors this week. Starbucks and Warner Bros. Discovery report earnings on Thursday and Cardinal Health does so on Friday.

Outside of earnings, Abiomed surged 49.9% after health care giant Johnson & Johnson said it will pay $16.6 billion for the heart pump maker. Johnson & Johnson slipped 0.5%.

In energy trading, benchmark U.S. crude added $1.22 to $89.59 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose $1.12 to $95.77 a barrel.

In currency trading, the U.S. dollar edged down to 147.31 Japanese yen from 148.23 yen. The euro cost 98.96 cents, up from 98.78 cents.

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AP Business writers Damian J. Troise and Alex Veiga contributed to this report.

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Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

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