Asian shares trade higher after Wall Street climbs moderately as Fed holds rates steady

Tokyo, May 8 (AP) Asian shares rose moderately Thursday after a lackluster finish on Wall Street, with most shares ticking higher after the Federal Reserve left its main interest rate unchanged, as was widely expected.

Japan's benchmark Nikkei 225 edged up 0.2 per cent in morning trading to 36,863.15. Australia's S&P/ASX 200 added 0.2 per cent to 8,190.40. South Korea's Kospi rose 0.3 per cent to 2,581.62. Hong Kong's Hang Seng surged 0.8 per cent to 22,864.74, while the Shanghai Composite gained 0.8 per cent to 3,342.66.

Investors continue to watch with trepidation President Donald Trump's comments about the trade imbalance, as well as the reactions from various nations to appease the US administration and the overall confusion over the long-term economic impact.

Geo-political tensions also weighed on market sentiments, centred around the standoff between India and Pakistan. Pakistan has said it will avenge those killed by India's missile strikes, which New Delhi called retaliation for last month's massacre of Indian tourists in Jammu and Kashmir. Pakistan called the strikes an act of war.

The missiles killed 31 people, including women and children, in PoK and the country's Punjab province. The strikes targeted at least nine sites “where terrorist attacks against India have been planned,” India's Defence Ministry said. Two mosques were hit.

On Wall Street, the S&P 500 gained 0.4 per cent, coming off a two-day losing streak that had snapped its nine-day winning run. The Dow Jones Industrial Average added 284 points, or 0.7 per cent, and the Nasdaq composite rose 0.3 per cent.

Indexes swivelled repeatedly through the day, and the Dow briefly climbed as many as 400 points on hopes that the United States and China may be making the first moves toward a trade deal that could protect the global economy.

The world's two largest economies have been placing ever-increasing tariffs on products coming from each other in an escalating trade war, and the fear is that they could cause a recession unless they allow trade to move more freely.

The announcement for high-level talks between US and Chinese officials this weekend in Switzerland helped raise optimism, but some of that washed away after Trump said he would not reduce his 145 per cent tariffs on Chinese goods as a condition for negotiations.

China has made the de-escalation of the tariffs a requirement for trade negotiations, which the meetings are supposed to help establish.

Such on-and-off uncertainty surrounding tariffs has helped create sharp swings within the US economy, including a rush of imports in the hopes of beating tariffs. Underneath those swings, as well as surveys showing US households are growing much more pessimistic about the future, the Fed said it continues to see the economy running “at a solid pace” at the moment.

Fed Chair Jerome Powell said that gives the central bank time to wait before making any potential moves on interest rates, even if Trump has been lobbying for quicker cuts to juice the economy.

“There's so much that we don't know,” Powell said. So like the rest of Wall Street and the world, the Fed is waiting to see what will actually end up happening in Trump's trade war and whether his tariffs, which were much stiffer than expected, will hit as proposed.

That's particularly the case after the trade war seems to be entering “a new phase,” Powell said, where the US is conducting more talks on trade with other countries.

The Fed also said it appreciates that risks to the economy are rising because of tariffs, which could both weaken the job market and push inflation higher.

“If the large increases in tariffs that have been announced are sustained, they are likely to generate a rise in inflation, a slowdown in economic growth and an increase in unemployment,” Powell said.

That could ultimately put the Fed in a worst-case scenario called “stagflation,” where the economy is stagnating while inflation remains high.

In the meantime, big US companies continue to produce fatter profits for the start of 2025 than analysts expected. The Walt Disney Co jumped 10.8 per cent after easily beating analysts' profit targets, raising its profit forecast and adding more than a million streaming subscribers.

All told, the S&P 500 rose 24.37 points to 5,631.28. The Dow Jones Industrial Average added 284.97 points to 41,113.97, and the Nasdaq composite gained 48.50 to 17,738.16.

In the bond market, Treasury yields fell following the Fed's announcement. The yield on the 10-year Treasury eased to 4.27 per cent from 4.30 per cent late Tuesday.

In energy trading, benchmark US crude gained 33 cents to USD 58.40 a barrel. Brent crude, the international standard, added 28 cents to USD 61.40 a barrel.

In currency trading, the US dollar edged down to 143.64 Japanese Yen from 143.76 Yen. The Euro cost USD 1.1330, up from USD 1.1317. (AP) NPK NPK

Source: PTI