Asian shares rise as investors watch Fed moves, inflation

TOKYO: Asian shares were mostly higher in muted trading Tuesday, as investors tried to digest a slew of economic data and awaited moves by the US Federal Reserve. Japan's benchmark Nikkei 225 rose 0.4% to 28,336.98. Australia's S&P/ASX 200 gained 0.5% to 7,366.90. South Korea's Kospi added 0.3% to 2,471.02.

Hong Kong's Hang Seng jumped 1.2% to 20,850.18, while the Shanghai Composite edged up 0.2% to 3,327.35/ The Reserve Bank of Australia decided to raise its key rate, cash rate target, 0.25 of a percentage point to 3.6%. It said that although global inflation remains high, inflation in Australia is starting to subside.

The hike was expected. “Asian equities were flat on Tuesday as traders weighed the impact of economic data and awaited key events that could impact equity markets in the coming days,” said Anderson Alves at ActivTrades. Stocks finished mixed on Wall Street. The S&P 500 rose 0.1% to 4,048.42 after coming off its first winning week in the last four.

The Dow Jones Industrial Average gained 0.1% to 33,431.44, and the Nasdaq composite slipped 0.1% to 11,675.74.

The stock market has found some footing over the last week after a roller-coaster start to the year where a swift rise gave way to a sharp tumble.

At the center of it all has been high inflation and expectations for what the Federal Reserve will do about it.

Early in the year, stocks rallied and bond yields eased as hopes rose that cooling inflation would get the Fed to take it easier on its hikes to interest rates.

Then, stronger-than-expected reports on the economy raised worries that inflation is not cooling as smoothly as hoped. While that calmed worries that a recession is looming, it also forced Wall Street to raise its forecasts for how high the Fed will take interest rates. Higher rates can drive down inflation, but they also hurt prices for stocks and other investments and can create a recession in the future. On Wall Street, technology stocks were some of the market's strongest. They tend to be some of the biggest beneficiaries of lower interest rates, which can boost demand by investors for high-growth companies.

Apple rose 1.9%, and Microsoft ticked up 0.6% to be the two biggest forces lifting the S&P 500. On the losing end was Tesla, which fell 2%.

Over the weekend, it cut the prices of two of its most expensive vehicles.

Bigger action may be ahead later this week, with several potentially market-moving events on the calendar.

Fed Chair Jerome Powell will testify before Congress for two days, beginning on Tuesday.

Other Fed officials' comments recently have led to big swings in markets, as traders try to get ahead of the next moves by the Fed.

On Friday, the government will release its latest monthly jobs report. If the reading it stronger than expected, particularly if it shows a big gain in wages, it could shake Wall Street and force it to raise rate expectations even higher.

The Fed has been trying to cool growth in wages to remove pressure on inflation, which remains far above its 2% target, and blowout figures could cause it to get more aggressive about rates.

The Fed's next move on rates will arrive later this month. Besides Friday's jobs report, upcoming releases on inflation across the economy will likely also carry a lot of weight on the decision.

The Fed has pulled its key overnight rate to a range of 4.50% to 4.75%, up from virtually zero at the start of last year, in its fastest set of hikes in decades.

Last month, it dialed down the size of its increases and highlighted progress being made in the battle to get inflation lower.

But that was before last month's string of hotter-than-expected data on inflation and other measures of the economy.

Wall Street now is bracing for at least three more hikes and the possibility the Fed could also ratchet the size of the increases back up.

In energy trading, benchmark U.S. crude added 22 cents to $80.68 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, rose 22 cents to $86.40 a barrel. In currency trading, the U.S. dollar inched up to 136.03 Japanese yen from 135.93 yen. The euro cost $1.0691, up from $1.0685.