Australia

Australian shares are set to gain today after US indices leaped on Wednesday. Despite the Federal Reserve raising interest rates yet again, remarks by Fed Chairman Jerome Powell boosted hopes that inflation will continue to cool off.

ASX futures were pointing up as of 8:00am on Thursday, at 20 points or 0.3% higher.

US stocks jumped Wednesday, erasing earlier losses, after the Federal Reserve said it had approved raising interest rates by a quarter of a percentage point.

The S&P 500 rose 1.05% after initially falling in reaction to the decision. The Dow Jones Industrial Average gained 0.02% while the Nasdaq Composite advanced 231 points, or 2.00%.

The market’s afternoon rally showed just how confident many investors have become that the Fed will end up lowering interest rates this year.

Fed Chair Jerome Powell acknowledged that the central bank's interest rate increases had begun to pull inflation lower. "We can now say, I think for the first time, that the disinflationary process has started," Mr. Powell said at a press conference following the central bank's meeting. But he pushed back against the idea that the central bank would consider cutting rates this year. Monetary policy does not yet look "sufficiently restrictive," he said.

Despite that cautionary note, markets took off. Stocks erased losses and climbed to session highs. All but one of the 11 sectors of the S&P 500 was trading higher.

In commodity markets, Brent crude oil declined 2.56% to $US83.27 a barrel while gold edged 1.01% higher to US$1,947.80.

Australian government bond yields increased, with the 2 Year reaching 3.14% and the 10 Year rising to 3.56%. In the US, the yield on 2 Year Treasury notes slipped to 4.10% while the yield on 10 Year Treasury notes fell to 3.39%.

The Australian dollar increased to 71.15 US cents from its previous close of 70.52. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged down to 94.31.

Asia

Chinese shares ended higher, climbing in line with other regional markets. The mood was brightened by expectations that the Federal Reserve might slow its policy tightening after the latest wage data showed signs of cooling. Investors awaited the central bank meeting later in the day. Gains were largely led by financials, auto makers and software companies. CITIC Securities rose 3.2% and Beijing Kingsoft Office Software added 3.4%. EV maker BYD Co. rose 6.5% after giving positive earning guidance Tuesday. Property stocks extended morning losses, with China Vanke dropping 0.6% and Poly Developments & Holdings declining by 0.9%. The Shanghai Composite Index climbed 0.9% to 3284.92, the Shenzhen Composite Index rose 1.4% and the ChiNext Price Index was 1.3% higher.

Hong Kong's Hang Seng Index closed 1.1% higher at 22072.18, rising alongside other regional markets amid hopes for a continued China reopening recovery and slower tightening from the Fed. Traders have been eyeing the upcoming U.S. Federal Open Market Committee decision, widely expecting that the central bank will slow down its pace of rate hikes, CMC Markets analyst Tina Teng said in a note. Among gainers on the Hang Seng Index were Chinese electric vehicle stocks, which extended overnight gains on Wall Street amid expectations of a brighter sales outlook. Among EV makers, BYD rose 6.1% while Geely Automobile closed 5.1% higher. Casino stocks also rose after Macau's local gaming authority reported that January's gross gaming revenues grew 82.5% on year. Among casino shares, Melco International added 4.9% while MGM China gained 4.7%.

The Nikkei Stock Average ended 0.1% higher at 27346.88, as gains in auto and shipping stocks helped offset losses in electronics and railway shares. Among the biggest movers, Lasertec fell 14% after cutting its fiscal year forecast for orders to be received.

India's benchmark Sensex index closed 0.3% higher at 59708.08 after a choppy session, as investors digested India's budget speech ahead of the FOMC meeting outcome due later in the day. "In the short term, we expect the markets to move higher on the back of pro-growth measures announced in the budget," B. Gopkumar, CEO of Axis Securities, said in a note. Financial stocks were higher, with ICICI Bank gaining 1.8% and HDFC Bank rising 1.5%. Jubilant Foodworks fell 6.3% after the company said it expects high inflation to keep its margin under pressure. The developments related to Adani companies remain closely watched following Adani Enterprises' $2.5 billion share sale.

Europe 

European stocks mostly surrendered earlier gains as investors turned cautious ahead of the US Federal Reserve interest rate decision. The pan-European Stoxx Europe 600 and the French CAC 40 both dropped 0.1% while the German DAX gained 0.3%.

The British FTSE 100 shed 0.1%, with Vodafone leading the decliners. The telecoms group lost 2.9% after reporting a slowdown in third-quarter service revenue growth. Anglo American dropped 1.5% after estimating that rough diamond sales in the first cycle of 2023 would fall compared to a year ago. Housebuilders declined after Nationwide data showed UK house prices fell more than expected in January. Entain shares increased 2.4% after it raised its full-year profit forecast. Halma added 2.2% after saying it has acquired Thermocable for its safety sector fire detection company, Apollo. GSK climbed 0.5% after the drugmaker's fourth-quarter results beat expectations.

"The second half of the week's action-packed schedule has given investors a reason to take risk off the table, as they await the Fed decision and the other major data on Thursday and Friday," IG analyst Chris Beauchamp wrote. "A hawkish Fed and poor tech numbers Friday would be a decent catalyst for a rout in stocks."

North America

US stocks jumped Wednesday, erasing earlier losses, after the Federal Reserve said it had approved raising interest rates by a quarter of a percentage point.

The S&P 500 rose 1.05% after initially falling in reaction to the decision. The Dow Jones Industrial Average gained 0.02% while the Nasdaq Composite advanced 257 points, or 2%.

The market’s afternoon rally showed just how confident many investors have become that the Fed will end up lowering interest rates this year.

Fed Chair Jerome Powell acknowledged that the central bank's interest rate increases had begun to pull inflation lower. "We can now say, I think for the first time, that the disinflationary process has started," Mr. Powell said at a press conference following the central bank's meeting. But he pushed back against the idea that the central bank would consider cutting rates this year. Monetary policy does not yet look "sufficiently restrictive," he said.

Despite that cautionary note, markets took off. Stocks erased losses and climbed to session highs. All but one of the 11 sectors of the S&P 500 was trading higher.

The Fed appears to be approaching a point at which it can consider pausing interest rate increases, said Phillip Neuhart, director of market and economic research at First Citizens Bank Wealth Management, in emailed comments. However, Mr. Neuhart, like many other investors, believes the Fed won't be in a rush to lower rates anytime soon.

What will be key to watch from here on out, investors say, is if the Fed shows signs that it will be more hawkish than they expect, or if the economy weakens more than they anticipate. Stocks have had a strong start to the year, with the S&P 500 posting its biggest monthly gain since October and the Nasdaq surging in its best January since 2001. Investors who believe the market can keep rising are counting on the economy avoiding a deep recession and data showing inflation continuing to moderate.

"For everybody, there is a level of data dependency. It's telling us what to expect for the coming weeks or months from the central banks," said Seema Shah, chief global strategist at Principal Asset Management. "Our focus is still on inflation and the labor market and what that means for the Fed."

Payroll provider Automatic Data Processing's employment report Wednesday showed the US private sector added 106,000 jobs in January, well below the 190,000 jobs economists surveyed by The Wall Street Journal had expected.

Other data have been more encouraging. Labor Department data Wednesday showed job openings rose sharply at the end of 2022, indicating demand for workers remains strong, even as economic activity slows down.