Australia

Australian shares are expected to decline this morning following a downbeat day in the US. The Federal Reserve approved another 0.25% increase in the federal funds rate, making borrowing money more expensive for companies and consumers. Investors were pessimistic about how the latest interest rate hike will impact corporate profits and the economy.

ASX futures had fallen 25 points or 0.3% as of 6:00am on Thursday, suggesting a negative open.

US stocks fell Wednesday, giving up their initial gains, after the Federal Reserve approved raising interest rates to their highest level in 16 years.

The S&P 500 slipped 0.7%, while the Dow Jones Industrial Average declined 0.8% and the Nasdaq Composite lost 0.5%.

Markets were relatively quiet leading up to the release of the Fed's interest rate decision. Stocks were then volatile in afternoon trading, with major indices hitting session highs and then erasing gains altogether as Fed Chair Jerome Powell addressed reporters at the post-meeting press conference.

In commodity markets, Brent crude oil backtracked 4.5% to US$71.94 a barrel while gold advanced 0.7% to US$2,031.66.

Australian government bonds lost, with the 2 Year yield decreasing to 3.22% and the 10 Year yield stumbling to 3.40%. US Treasury notes also declined, with the 2 Year yield down to 3.87% and the 10 Year yield falling to 3.36%.

The Australian dollar moved up slightly to 66.64 US cents from its previous close of 66.62. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, inched lower to 95.83.

Asia

The Shanghai Stock Exchange was closed Wednesday in observance of Chinese Labor Day.

Hong Kong stocks ended lower, weighed by tech companies ahead of the US Federal Reserve's policy decision. Many expect the Fed to raise interest rates again, which could increase corporate borrowing costs and hurt consumption. The Hang Seng Index declined 1.2% to 19699.16. The Hang Seng Tech Index dropped 1.6% with Alibaba Group down 2.4% and Baidu losing 3.1%. Energy companies extended their recent losses, weighed by China's soft April PMI data. ENN Energy dropped 4.5% and CNOOC declined 3.3%. Among gainers were consumption-related companies with Budweiser Brewing gaining 2.9% and Haier Smart Home rising 2.2%.

The Tokyo Stock Exchange was closed Wednesday in observance of Constitution Memorial Day.

India's benchmark Sensex index closed 0.3% lower at 61193.30, with investors focused on the upcoming US Federal Reserve rate decision, as well as upcoming corporate earnings. Decliners included Bharti Airtel, which was 1.5% lower; Tech Mahindra, which also declined 1.5%; and Axis Bank, which fell 1.2%. Gainers included Hindustan Unilever, which added 1.4%.

Europe

European stocks rose Wednesday as investors looked ahead to interest rate decisions from the Federal Reserve and the European Central Bank. The pan-European Stoxx Europe 600 gained 0.3%, the German DAX added 0.6% and the French CAC 40 was 0.3% higher. The United Kingdom’s FTSE 100 closed up 0.2%. Investors awaited the Fed’s announcement later in the day, as well as the ECB's on Thursday.

"Both central banks face an economy that is slowing, but where inflation is high, and unemployment at multiyear lows, and stress on the banking sector remains a very clear concern," CMC Markets analyst Michael Hewson wrote. The messaging around their decisions will dictate how much volatility is seen for the rest of the week, he added.

North America

US stocks fell Wednesday, giving up their initial gains, after the Federal Reserve approved raising interest rates to their highest level in 16 years.

The S&P 500 slipped 0.7%, while the Dow Jones Industrial Average declined 0.8% and the Nasdaq Composite lost 0.5%.

Markets were relatively quiet leading up to the release of the Fed's interest rate decision. Stocks were then volatile in afternoon trading, with major indices hitting session highs and then erasing gains altogether as Fed Chair Jerome Powell addressed reporters at the post-meeting press conference.

Many investors initially appeared to interpret the central bank's latest policy statement as a sign it is likely to hold rates where they are, instead of pushing through further rate increases in the months ahead. The Fed cut language from its previous policy statement from March that had said "additional policy firming may be appropriate." However, Mr. Powell said the Fed had not yet made a decision on a pause.

Some analysts cautioned that the Fed has still left itself room to potentially raise rates again down the line if data suggests inflation is not subsiding quickly enough. Earlier Wednesday, data from payroll processor Automatic Data Processing showed hiring among US private-sector employees rose far more than economists had expected in April.

"We can still expect a fair amount of volatility across markets," said Mike Loewengart, head of model portfolio construction at Morgan Stanley Global Investment Office.

So far, data have mostly suggested the US economy is continuing to hold up better than many had feared. But Mr. Loewengart said with inflation continuing to trend well above pre-pandemic levels, and the Fed's target interest rate at its highest level since 2006, corporate earnings will likely come under pressure, making it all the more important to be selective about which companies to invest in.

"We know the economy is slowing. I think the debate is about the magnitude of whatever recession might occur," he said.

Meanwhile, a string of earnings reports drove swings among individual stocks.

Pizza Hut parent Yum Brands fell 3.9% after reporting worse-than-expected earnings for the first three months of the year, in part because of fluctuations in currency markets.

Clorox, which shared results after the closing bell Tuesday, jumped 4.7%. The maker of its namesake bleach and cleaning products, as well as Pine-Sol, raised its sales outlook for the rest of the year.

Advanced Micro Devices slipped 9.3% after issuing guidance for the current quarter that disappointed analysts Tuesday evening.

Regional bank stocks extended declines Wednesday following the seizure of First Republic Bank, which had put pressure on stocks Tuesday. PacWest Bancorp fell 2%, while Western Alliance Bancorp shed 4.4%.

Mr. Powell said conditions in the banking sector had broadly improved since early March, and that he felt the US banking sector was "sound and resilient." The Fed would continue to monitor conditions in the banking sector, he added.