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Asia-Pacific markets set to trade mixed as investors digest Fed remarks

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SINGAPORE — Asia-Pacific markets were set to trade mixed on Thursday as investors digest an overnight update from the U.S. Federal Reserve that indicated the central bank plans to raise interest rates as soon as March.

Nikkei futures pointed to a cautious open in Japan whereas Australia’s benchmark ASX 200 rose 0.85% in early trade.

Thursday’s session in the Asia-Pacific followed overnight declines on Wall Street where the Dow Jones Industrial Average ended the day down 129 points, after gaining more than 500 points at one point, following the Fed’s update.

Oil prices rose as much as 2% overnight, with international benchmark Brent crude futures hitting $90 on Wednesday for the first time since 2014.

On the earnings front, Samsung Electronics is set to report fourth-quarter results.

The Taiwan market is closed for a holiday on Thursday.

Fed meeting, U.S. markets

The Federal Open Market Committee said a quarter-percentage point increase to its benchmark short-term borrowing rate is likely forthcoming — it would be the Fed’s first hike since December 2018.

Fed Chair Jerome Powell indicated at a news conference that the U.S. central bank had “quite a bit of room to raise interest rates without threatening the labor market.” Inflation stateside is running at its hottest level in nearly 40 years.

While the Fed’s post-meeting statement did not provide a specific time for when the hike would come, indications suggest it could happen as soon as at its March meeting.

“The Fed also used this meeting to continue discussion on balance sheet normalisation and released a set of principles on its approach to shrinking the balance-sheet. Of most importance was a desire to make it predictable but sensitive to both the economy and markets,” the ANZ analysts said.

Major U.S. stock market averages reversed gains after Powell’s comments.

The Dow Jones Industrial Average closed down 0.4% on Wednesday at 34,168.09. It was up more than 500 points before the Fed update. The S&P 500 slid 0.2% to 4,349.93, while the Nasdaq Composite ended the session almost flat at 13,542.12, buoyed by Microsoft’s post-earnings gain.

Oil hits $90 on Russia-Ukraine tensions

Brent crude futures gained more than 2% at one point on Wednesday, reaching a high of $90.47 per barrel for the first time since October 2014. The contract later pulled back before settling at $89.96 per barrel.

The price move came as tensions between Russia and Ukraine continue to grow, and fears of an attack on the Eastern European country remain.

U.S. crude futures also rose over 2% to settle at $87.35 per barrel after hitting a high of $87.95 during the session.

Meanwhile, spot gold declined after the Fed’s latest comments, falling as much as 1.8% to its lowest in a week at $1,815.06, according to Reuters. It last traded at $1,821 in Asia on Thursday.

Currencies

The U.S. dollar index, which tracks the greenback against a basket of its peers, last traded at 95.948.

In other currencies, the Japanese yen traded at 114.70 per dollar, while the Australian dollar was at $0.7120.

— CNBC’s Saheli Roy Choudhury, Jeff Cox, Hannah Miao and Fred Imbert contributed to this report.

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