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The ASX opened strong after the US interest rate rise buoyed Wall Street. But it hasn’t canceled out Tuesday’s losses

A few days ago the American stock market saw massive falls over fears the US Federal Reserve would raise interest rates and spark a recession.

Today, it raised rates by three-quarters of a percentage point, with the key interest rate target range of 1.5 to 1.75 per cent — which was exactly what investors were fearing.

But we didn’t see another dark day on Wall Street off the back of that news — in fact, US stock market index the Dow Jones was up 1 per cent when it closed.

And when the Australian stock market opened this morning, it was up by more than 1 per cent in the first hour of trade.

Why did the stock market bounce back if rates went up?

Partially because they didn’t go up any higher than anticipated.

But also because, while hinting the next rate rise could be by either half or three-quarters of a percentage point, Federal Reserve boss Jerome Powell suggested future rate rises won’t be as steep:

“Today’s 75 basis point increase is an unusually large one and I do not expect moves of this size to be common.”

So that would have given investors more confidence, which was what really fuels the stock market.

And because what happens on the US stock market impacts what happens on our share market operator, the Australian Securities Exchange (ASX), local shares also rallied.

Has this canceled out the ASX losses from earlier this week?

Nope.

On Thursday, the ASX200, which is a measure of how well the Australian stock market is doing based off the top-performing 200 companies, went down despite the morning gains.

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