ASX 200 Set for Lower Opening Amid Fed Rate Hike

The ASX 200 is expected to open lower on Thursday after the Federal Reserve's decision to raise interest rates by 25 basis points to a target range of 3.75%, 4.00%. The rate hike was unanimous, with Chair Kevin Warsh not providing any reason for it being a one-off reversal.

The S&P/ASX 200 futures are pointing to a 68-point drop, or 0.8%, at the Sydney open, which would erase Wednesday's modest rebound if carried into cash trading. The index closed on September 16 at 8,696.5, up 24 points or 0.28%, after energy and materials shares outweighed another decline in financials.

Financials are particularly vulnerable to rate hikes, as they can lift wholesale funding costs, pressure credit demand, and reduce the valuation investors will pay for future earnings. The sector fell 0.37% on Wednesday even as the broader index rose, while all four major Australian banks now forecast a Reserve Bank of Australia increase in November.

The resilience of materials and energy sectors, which gained 1.28% and 2.19%, respectively, will be crucial in determining the direction of the market. A firmer U.S. dollar or weaker commodity prices could remove their buffer quickly, making the futures signal less decisive.