Asian Stocks Rise as Fed Hike Eases Bond Market Jitters; China Equities Lag

Most Asian stock markets advanced on Thursday after the U.S. Federal Reserve's latest interest rate increase helped soothe concerns in the bond market, though shares in China and Hong Kong declined amid pressure on the technology sector.

Fed Decision Calms Bond Markets

The U.S. central bank unanimously raised its benchmark federal funds rate by 25 basis points to a target range of 3.75% to 4.00%, its first hike since 2023, according to Investing.com. The move, along with projections pointing to one more increase this year, appeared to provide investors with a clearer policy outlook, leading to a stabilization in U.S. Treasuries.

The yield on the 2-year Treasury note, which is sensitive to Fed policy expectations, fell 1 basis point to 4.72%. The improved sentiment was also reflected in U.S. equity futures during Asian trading hours, with S&P 500 futures gaining 0.7%.

Divergence Across Asian Bourses

The broader MSCI Asia Pacific index rose 0.4%, but performance varied significantly across the region. Markets in Japan, South Korea, and Australia posted modest gains, while Chinese equities underperformed.

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• Japan's Nikkei 225: +0.4%
• South Korea's KOSPI: +0.3%
• Australia's S&P/ASX 200: +0.3%

In contrast, Hong Kong's Hang Seng Index fell 1.1%, dragged down by losses in major technology companies like Alibaba and Tencent. Mainland China's blue-chip CSI 300 index also slipped 0.4%.

Sector Focus and Outlook

Semiconductor stocks across Asia showed mixed results as investors weighed the impact of higher borrowing costs against the long-term outlook for artificial intelligence spending. South Korea's SK Hynix fell 0.9%, and several Japanese and Chinese chip-related firms also declined.

Investor focus now shifts to other key central bank meetings. The Bank of England is widely expected to announce its rate decision on Thursday, followed by the Bank of Japan on Friday, which markets anticipate will deliver a rate hike.