US tech-heavy Nasdaq 100 traded up more than 3% on Thursday, while S&P 500 was up 2% as investors digested a quarter percentage point hike in the US interest rate.
- The US Federal Reserve announced the hike in the benchmark rate, a rise from the near-zero pandemic level.
- Markets warmed up to the Fed’s hawkish stance, especially in its assurance of making moves to tame inflation, which has hit a record high. The central bank said it would consider rate increases in its remaining six meetings in 2022, with a target to end the year at 1.9%.
- The Fed statement coincided with stock optimism, with UBS’s head of global asset allocation saying that the central bank’ stance engineered a soft landing which is positive for equities.
- Apart from the US, key equity indexes gained on Thursday, with Nikkei 225 up 3.46% while China’s Hang Seng Index rose more than 7%. European stocks held steady.
- In the other markets, the yield on the 10-year Treasury note fell by four basis points to around 2.15%. The dollar index fell about 0.15%.
- Gains were also replicated in crypto markets, with Bitcoin topping 40,000 while the altcoins also rose.
- The Fed promised to embark on further policy tightening, saying it will start the balance sheet reduction in May. The officials downplayed the likelihood of a recession due to the Ukrainian war, although they pointed out an impact on economic growth and inflation.
The Fed’s policy rate hike is the first in almost three years, with the central bank tightening the policy to tame the rising inflation, which is running at a 4-decade high.
NASDAQ 100 is up +3.70%, Hang Seng Index is up +7.04%, Nikkei 225 is up +3.46%, DXY is down -0.15%
Source: The Federal Reserve