Asia shares, gold rise as US Fed nods to inflation easing; STI down as bank shares drop

Sydney – Asian shares advanced and gold hit more than a nine-month high on Thursday after Federal Reserve chair Jerome Powell said the United States central bank had made progress in its battle against inflation.

A benchmark of Asian stocks climbed about 0.7 per cent, with Hong Kong-listed technology companies among the top performers. The picture was more mixed in Japanese and mainland China markets, while Adani Group companies led the Indian market lower.

Japan’s Nikkei index rose 0.26, while Hong Kong’s Hang Seng Index gained 0.3 per cent and the Shanghai Composite Index edged up 0.15 per cent.

Singapore’s Straits Times Index, however, was down 0.5 per cent as at 1.36pm as local banks’ shares dropped on expectations that the Fed is close to ending its rate hikes. Higher interest rates help to boost banks’ interest margins.

DBS Bank shares fell 2.04 per cent, while OCBC Bank was down 0.85 per cent and UOB dropped 0.64 per cent.

Spot gold was up 0.1 per cent at US$1,951.79 per ounce as at noon Singapore time, after hitting its highest since April 2022 earlier in the session. United States gold futures rose 1.3 per cent to US$1,967.40.

The

Fed delivered a quarter-percentage-point rate increase

on Wednesday after a year of larger hikes. However, Mr Powell warned of further monetary policy tightening while noting the progress on disinflation, which he said was in its early stages.

“Although Powell said rate hikes might continue, the market expects the Fed not to be drastic any more, which is supporting gold. However, we will soon see some profit-booking and bullion continues to face resistance at the US$1,960 level,” said Mr Brian Lan, managing director at Singapore-based dealer GoldSilver Central.

“Going forward, traders will focus on economic data and Fed officials’ comments for further direction.”

Gold tends to benefit in a lower interest rate environment, as it reduces the opportunity cost of holding non-yielding bullion.

If there are more signs of a slowdown in the US economy and the Fed continues to lower rates, then investor demand for gold will rise, said Mr Caesar Bryan, a portfolio manager at Gabelli Gold Fund.

The US dollar continued its decline against both Group of 10 and emerging market currencies. A gauge of the greenback’s strength was at the lowest level since April as global investors position for a potential peak in US interest rates.

Mr Powell’s comment that the “disinflation process has started” suggested that the aggressive tightening cycle is starting to have its desired effect of reducing the pace of price growth, helping the S&P 500 jump more than 1 per cent on Wednesday. The tech-heavy Nasdaq 100 outperformed major benchmarks, closing at the highest since September.

Positioning in US swaps markets assumes the Fed is getting closer to cutting rates as traders bet that economic conditions are likely to keep it from the additional rate increases that policymakers still anticipate.

“I think the market took what Powell didn’t say and ran with it,” said Ms Karen Jorritsma, head of Australian equities at RBC Capital Markets. “He was pretty clear that he would stay on a restrictive stance as long as was needed and that some signs are coming through in the data although unemployment was at a 50-year low.”

Adding to the positive tone for risk-taking, in US after-hours trading, Meta Platforms surged, leading social media stocks higher, after reporting better-than-expected sales during the holiday quarter.

The Adani Group’s deepening crisis, however, continued to rumble through Asian markets on Thursday. Adani Enterprises tanked as much as 10 per cent in early Mumbai trading after the company said it had abandoned its follow-on share sale to insulate investors in the offering from potential losses. The other nine stocks in the group also fell.

Stocks in Indian billionaire Gautam Adani’s conglomerate

extended their market rout,

while its US dollar bonds plunged to distressed levels.

Elsewhere in markets, oil staged a partial rebound after slumping on Wednesday as the US dollar fell and traders weighed the potential for better demand in China.

Bitcoin hit the highest since August

in the wake of the Fed decision. BLOOMBERG