Global Markets Follow Wall Street Higher After Fed Raises Rates

Fed officials penciled in six more interest-rate increases by year’s end, as the U.S. central bank moved more aggressively to slow inflation, which is running at a four-decade high.

Although the Fed’s stance has become more hawkish, it “wants to try to engineer a soft landing, and that’s actually quite a positive outcome for equities,” said Adrian Zuercher, the head of global asset allocation at UBS’s chief investment office. 

Mr. Zuercher pointed to signs that the Fed is willing to tolerate inflation’s overshooting the central bank’s 2% target—most officials now see core inflation ending the year at 4.1%—as indicating that policy makers were focused on not scuttling the economic recovery.

Chinese shares rallied for a second day, with Hong Kong’s Hang Seng Index advancing more than 6% by midafternoon, and the CSI 300 index, which tracks blue chips in Shanghai and Shenzhen, gaining 2%. 

Among big Chinese technology companies, Tencent Holdings gained more than 6% and Meituan surged 11%. Beaten-down property shares also rocketed higher, with Country Garden Holdings adding 28%.

Supportive government comments had fueled a huge recovery in Chinese stocks Wednesday after several days of heavy selloffs, with the Hang Seng staging its biggest single-day rally since 2008 and many tech shares jumping more than 30%.

China’s market will likely remain extremely volatile over the next few weeks, partly due to the war in Ukraine, as China relies on Russia for some commodity imports, said Mr. Zuercher at UBS. Extended lockdowns could also reduce company earnings, if China cannot bring its Covid-19 outbreaks under control soon, he added. 

In the bond markets, the yield on the one-year Treasury note declined 0.018 percentage point to 1.281%, while the 10-year note’s yield stood at 2.144%, Tradeweb data showed. Bond yields rise as prices fall.

Write to Clarence Leong at [email protected]