Australia stocks set for muted start after U.S. Fed hikes interest rate as expected

SINGAPORE — Shares in Australia looked set for a muted start on Thursday following the U.S. Federal Reserve’s widely expected decision overnight to hike rates by half a a percentage point — its biggest increase in two decades.

Futures pointed to a little changed open for Australian stocks. The SPI futures contract sat at 7,303, against the S&P/ASX 200’s last close at 7,304.70.

Mainland Chinese stocks are set to return to trade following days of holidays. Investors will watch for market reaction after data released over the weekend showed Chinese factory activity contracted in April as Covid lockdowns hit industrial production.

Markets in Japan and South Korea are closed on Thursday.

The U.S. Federal Reserve on Wednesday increased its benchmark interest rate by half a percentage point, in line with market expectations. The central bank also outlined a program whereby it will eventually cut its bond holdings by $95 billion a month.

Fed Chair Jerome Powell emphasized the commitment to bringing inflation down, though he said a 75 basis points hike is “not something the committee is actively considering.”

Markets on Wall Street jumped overnight following the Fed decision, with the S&P 500 rising nearly 3% to 4,300.17. The Dow Jones Industrial Average surged 932.27 points, or 2.81%, to 34,061.06. The Nasdaq Composite soared 3.19% to 12,964.86.

The U.S. dollar index, which tracks the greenback against a basket of its peers, was at 102.587 following a recent decline from above 103.

The Japanese yen traded at 129.30 per dollar, stronger as compared to levels above 130 seen against the greenback yesterday. The Australian dollar changed hands at $0.7245 after a recent surge from below $0.721.

— CNBC’s Jeff Cox contributed to this report.