Title: Asian shares fall as Fed hike relief rally fizzles

Jun 16, 2022 02:26AM ET

By: AnalysisWatch

Asian stocks stumbled on Thursday and the dollar regained ground as investors continued to digest the impact of soaring inflation and an aggressive outlook for policy tightening from global central banks.

Equity futures in Europe indicated a slightly higher open, with futures on the euro Stoxx 50 across the region and Germany's DAX rising around 0.4% a day after the European Central Bank pledged fresh support to ease bond market volatility.

Futures on the FTSE index fell 0.1% ahead of an expected Bank of England interest rate hike aimed at fighting inflation.

In Asia, the downside reversal in equities came after the U.S. Federal Reserve on Wednesday approved the biggest interest rate hike since 1994, raising the target federal funds rate by 75 basis points to a range of 1.5% to 1.75%. Fed officials also see further steady increases this year, with the federal funds rate expected to reach 3.4% by the end of the year.

Although stock investors initially welcomed the widely anticipated move, growing concern eroded gains as the trading day progressed.

Friday's data showed a sharper-than-expected rise in U.S. inflation in May, with a University of Michigan survey showing that consumers' five-year inflation expectations rose sharply to the highest level since June 2008.

In Tokyo, the Nikkei pared earlier gains of as much as 2.38% and was last higher by 0.40%.

After retreating from a 20-year high following the Fed meeting, the dollar regained its footing during the Asian session.

The global dollar index, which tracks the greenback against a basket of six peer currencies, was last up 0.27% at 105.08, with the dollar jumping to 134.34 against the yen.

The euro fell 0.15% to $1.0427.

The two-year yield fell to 3.2525% from Wednesday's close of 3.2790%.

In commodity markets, oil prices recovered from a sharp decline as investors focused on tight supplies. Brent crude oil was last up 0.27% at $118.83 per barrel and US crude added 0.49% to $115.88.

Gold was slightly lower as the dollar strengthened. Spot gold last traded at USD 1,831.26 per ounce, down 0.12% on the day.