Kevin Buckland

TOKYO, Reuters – A jump in stocks in Japan and Hong Kong on Thursday led to a rally in Wall Street overnight. This was due to a decrease in potential risk from Federal Reserve monetary tightening.

After spiking overnight to near three-year highs, Treasury yields eased slightly. Shorter-end yields rose more to flatten out the curve after the Fed increased the policy rate for only the second time since 2018. As expected, the Fed increased rates by quarter point. Telegraphed equal hikes were also planned at all Fed meetings for this year in order to combat inflation.

However, the safe-haven currency, however, was still on the sidelines. Oil also stabilised well below recent multi-year highs, amid indications of material progress between Russia and Ukraine in negotiations to end an almost three-week-old incursion that Moscow calls a “special military operations” to demilitarize Ukraine.

Investor concerns regarding a slowdown in China’s economy, as it battles a COVID-19 epidemic, have been allayed by Vice Premier Liu He’s signalling more support for markets.

The stock market soared by 3.0% to touch a new two-week high on Thursday, as South Korea’s Kospi rose 1.6% while Australia’s benchmark gained 1.4%.

Blue chips from China gained 2.1% and Hong Kong’s rose 5.2%.

A MSCI Index of Regional Shares rose 2.5%

U.S. stock options showed a 0.3% drop at the restart but followed a 2.2% overnight surge.

The Fed was more hawkish than usual, but stocks remained strong because chair Jerome Powell said that “the economy was strong enough for hikes and that he wasn’t worried about the possibility of recession,” Taylor Nugent (National Australia Bank) wrote in a client letter.

According to Nugent, “Glimmers” of progress in the ongoing Russia-Ukraine peace negotiations had lifted market sentiment. Nugent also noted that comments by Chinese officials suggesting that the Chinese response to the COVID surge would be coordinated with other efforts to promote economic growth.

The yields of Japanese and Australian government bonds increased on Thursday in response to an overnight jump in U.S. Treasury yields.

After the Fed’s decision, the Treasury yield rose to 2.002%. The yield on the 10-year Treasury increased to 2.2460% before falling to 1.9235% in Tokyo. On Thursday, it fell to 2.1545%. Both were at their highest levels since May 2019.

Although the greenback, which is a safe haven, was not in favor amid improved market sentiment. While the Fed’s meeting result was hawkish, analysts considered it to be within market expectations.

After a decline of 0.47% Wednesday, the, which measures the currency’s performance against six other major currencies, was weaker, falling an additional 0.12%, to 98.360.

On Thursday, the ticker advanced after the International Energy Agency(IEA) stated that a drop in oil demand dues to lower prices would not compensate for a Russian shut-in but not enough to offset previous days’ declines.

Futures prices rose by 66 cents or 0.67 percent to $98.68/barrel, against a peak price of $129.30. U.S. West Texas Intermediate crude (WTI), was up 84cs or 0.86% to $95.86 per barrel, against a peak earlier in the month of $124.58.