Asia-Pacific Markets Mixed after North, South Korea Fire Missles; Traders Glued to Fed Rate Decision

The major Asia-Pacific stock indexes are trading mixed on Wednesday as investors braced for the U.S. Federal Reserve’s monetary policy and interest rate decisions, due to be released at 18:00 GMT. The Fed is widely expected to raise its benchmark rate by 75-basis points, but the market moving event will be its decision to remain hawkish or signal a slowdown in future rate hikes.

Traders are also braced for the Fed to end rate hikes in March at a level of 5%, and market pros say a more hawkish Fed could trigger a violent reaction in the stock market, according to CNBC.

Furthermore, Fed Chair Jerome Powell is expected to sound somewhat hawkish in his post-meeting briefing Wednesday and emphasize that the Fed’s goal is to crush inflation, CNBC wrote.

At 04:58 GMT, Japan’s Nikkei 225 Index is trading 27642.13, down 36.79 or -0.13%. Hong Kong’s Hang Seng Index is at 15724.23, up 268.96 or +1.74% and South Korea’s KOSPI Index is trading 2334.85, down 0.37 or 0.02%.

In China, the Shanghai Index is trading 2995.26, up 26.06 or +0.88% and Australia’s S&P/ASX 200 Index is at 6989.00, up 12.10 or +0.17%.

North Korea Fires Missile Barrage

Defense-related stocks listed in South Korea and Japan rallied after military officials in Seoul confirmed North Korea fired more than 10 types of missiles off its eastern coast.

The volley of missiles included one ballistic missile that landed in the free waters on South Korea’s side of the Northern Limit Line, a defacto sea border that separates the two Koreas – the first instance since the Korean War, authorities said.

Shares of defense companies Hanwha Aerospace jumped more than 5% in Korea’s morning trade, and Victek climbed more than 7%.

Japanese defense stocks were trading slightly higher with Hosoya Pyro-Engineering up nearly 1%.

Daily Forecast

Traders are monitoring the situation with North Korea very closely but so far, the missile launches haven’t had much of an effect on the direction of the markets. Some companies are benefiting from the military activity, but most traders are keeping their powder dry ahead of the Fed because of uncertainty over whether the central bank will announce the start of smaller rate hikes in December.

The financial markets widely expect the Fed to go big for the fourth straight time, but it’s mixed on the size of the hike in December.

Global equity markets starting with the U.S. could rally if the Fed announces the slowdown, but they could get crushed if Federal Reserve Chair Powell comes across as hawkish in his quest to beat down soaring inflation.