By Gregor Stuart Hunter
Nikkei rises after holiday; Tencent's losses hold back Hang Seng
Asian stock markets outside mainland China strengthened Thursday, after the Federal Reserve raised interest rates but stopped short of signaling a faster pace of increases for this year.
The Fed raised rates by a quarter percentage point, which was widely expected, and lifted its forecasts for gross domestic product growth for this year and next. While it also signaled that rates would rise over the next three years by more than it forecast in December, it stayed on track for three increases this year.
That reassured investors that the Fed won't ramp up the pace of rate increases this year, encouraging gains in most markets. But the Fed's move prompted the People's Bank of China to raise short-term interest rates, which weighed on mainland stocks.
The Nikkei Stock Average ended the morning session 0.4% higher as traders returned to work after a holiday. Energy stocks led gains in Tokyo as crude oil prices rallied on a surprise decline in U.S. oil inventories. Benchmark Brent crude futures were last up 0.1% at $69.10 a barrel. South Korea's Kospi gained 0.7% and New Zealand's S&P/NZX50 was flat after its central bank left policy unchanged.
Stocks in Australia were largely flat after jobs data showed 17,500 jobs were created in February, slightly below expectations for 20,000, though there were solid gains in full-time employment.
In Hong Kong, the Hang Seng Index rose 0.1% with energy stocks leading gains. Tech behemoth Tencent Holdings (0700.HK) weighed on the index after reporting declining profit margins in its underlying business on Wednesday. It was recently down 2.2%.
The Hong Kong Monetary Authority also lifted its base rate by a quarter percentage point to 2%. The Hong Kong dollar, which moves in a tightly controlled range against the U.S. dollar, weakened slightly to 7.8467.
In China, the Shanghai Composite fell 0.8% while stocks in Shenzhen slipped 1.1% after the PBOC lifted its seven-day reverse repo rate, a benchmark for short-term interest rates, by 0.05 percentage point to 2.55%.
Central banks in Taiwan, the Philippines and Indonesia are due to meet later Thursday, though all are expected to stand pat. The Bank of England also meets later Thursday.
The Federal Open Market Committee "wanted to sound hawkish and tried to do so in the least disruptive manner possible," said Marvin Loh, senior global market strategist at BNY Mellon.
Elsewhere, a White House spokesman said President Donald Trump would take action Thursday regarding "China's state-led, market-distorting efforts to force, pressure, and steal U.S. technologies and intellectual property."
The White House is expected to announce a raft of punitive measures aimed at China, including levies totaling at least $30 billion.
The U.S. government has sought to harden policy toward China on intellectual property issues for some time, said Ian Hui, global market strategist at J.P. Morgan Asset Management.
"For the moment, we don't see this as a trade war, but a trade skirmish," he said. However, China's response will be key to watch, he added.
The less hawkish-than-expected Fed interest rate view and the prospect of further trade friction dragged on the dollar.
The ICE U.S. Dollar Index, which tracks the dollar's strength against a basket of six major currencies, was last down 0.3%. The U.S. dollar was last 0.4% weaker against the yen at Yen105.67.
Yields on benchmark U.S. 10-year Treasury notes were last 0.03% lower at 2.872%.