Asian shares rose on Wednesday after the Bank of Japan decided to raise its key interest rate.
The Federal Reserve is expected to make policy decisions later in the day, and another decision from the Bank of England is expected on Thursday.
Japan’s benchmark Nikkei 225 pared earlier losses to close 1.5% higher at 39,101.82 after the central bank decided to raise its benchmark interest rate to around 0.25% from 0.1%.
A BOJ rate hike would boost the yen, but as the decision was widely expected, the dollar actually yo-yoed against the Japanese currency, at times trading above 153.00 yen. The dollar fell to 151.60 Japan time late Wednesday afternoon.
The dollar recently breached the 160 yen level, adding to pressure on the BOJ to act. The bank has remained cautious about suppressing growth and has just moved a step away from its ultra-loose monetary policy.
“It seems that policymakers are inclined to raise rates to limit excessive declines in the yen, but are cautious not to trigger an overreaction to the move,” IG’s Yeap Jun Rong said in a commentary.
The U.S. Federal Reserve is expected to hold off on cutting interest rates when it announces its decision on Wednesday. It is widely expected to do so at its next meeting in September.
Hong Kong’s Hang Seng rose 2.2% to 17,380.46 and the Shanghai Composite index rose 2.1% to 2,938.75 after official data showed Chinese manufacturing activity shrank for a third straight month in July, fueling expectations that Beijing will need to roll out more stimulus to stem the slowdown.
Australia’s S&P/ASX 200 rose 1.6% to 8,080.30 after data showed annual inflation rose to 3.8% from 3.6% at the start of the year. In addition, the consumer price index rose 1% compared to the last quarter.
In South Korea, the Kospi rose 0.9% to 2,761.72 after Samsung Electronics reported a 15-fold increase in operating profit in the latest quarter.
On Tuesday, the S&P 500 fell 0.5% to 5,436.44, though two of the three stocks in the index rose. The Dow Jones Industrial Average rose 0.5% to 40,743.33 and the Nasdaq Composite fell 1.3% to 17,147.42.
PayPal rose 8.6%, helping lead the market gainers after it beat analysts’ expectations for spring earnings. It also raised its full-year profit forecast.
JetBlue Airways climbed 12.3 percent after reporting a profit for the spring, while analysts had expected a loss. The airline also outlined ways it hopes to improve on-time performance and attract customers.
Most other stocks in the group that has become known as the “Magnificent Seven” fell Tuesday, including a 7% drop for Nvidia.
Helpfully for the market, other stocks have risen to offset recent weakness in Big Tech, including smaller stocks and companies whose profits are closely tied to the strength of the economy. They rose on hopes that inflation will ease enough to prompt the Federal Reserve to cut interest rates soon.
The Russell 2000 index of smaller stocks rose 0.3% on Tuesday, extending its market-leading gain for the month to 9.5%.
Expectations of a more dovish Fed soon have sent bond yields tumbling, and they fell further on Tuesday. The yield on the 10-year Treasury note fell to 4.14% from 4.17% late Monday.
Yields got a brief boost after a pair of stronger-than-expected economic reports. One showed U.S. employers posted slightly more job openings in late June than economists had expected. That’s a good sign for workers, but too much strength could put upward pressure on inflation.
Meanwhile, a second report said U.S. consumer confidence is improving more than economists had expected. Here too, hopes are pinned on a “Goldilocks”-style reading that is neither so hot as to raise fears of rising inflation nor so cold as to warn of a possible recession.
In other trading, benchmark U.S. crude rose $1.55 to $76.28 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose $1.49 to $79.56 a barrel.
The euro rose from $1.0816 to $1.0825.
