The US Federal Reserve on Wednesday announced its first interest rate hike of 0.23 percent or 25 basis points in over three years late last night. It also laid out an aggressive plan to push borrowing costs to restrictive levels next year in a pivot from battling the coronavirus pandemic to countering the economic risks posed by excessive inflation and the war in Ukraine.
Indian markets ended with healthy gains on March 16, tracking positive global cues as hopes of an end of the ongoing Russia-Ukraine war lifted sentiment. Sensex closed with strong gains of 1,040 points, or 1.86 percent, at 56,816.65 while the Nifty settled 312 points, or 1.87 percent, higher at 16,975.35. The rally in the market was broad-based as the BSE Midcap and Smallcap indices closed 1.80 percent and 1.47 percent higher, respectively.
Shares in Asia-Pacific rose in Thursday morning trade following overnight gains on Wall Street, while the US Federal Reserve announced its first rate hike in more than three years. The Nikkei 225 in Japan jumped 3.54 percent in morning trade as shares of Fast Retailing soared 6.71 percent while SoftBank Group surged 8.79 percent. The Topix index climbed 2.53 percent.
The S&P 500 closed up more than 2 percent, while the Nasdaq rallied almost 4 percent on Wednesday, as investors shrugged off initial jitters following the US Federal Reserve's interest rate increase and its signal that more hikes would be needed to fight inflation, ending the pandemic-era's easy monetary policy. The Dow Jones Industrial Average rose 518.76 points, or 1.55 percent, to 34,063.1, the S&P 500 gained 95.41 points, or 2.24 percent, to 4,357.86 and the Nasdaq Composite added 487.93 points, or 3.77 percent, to 13,436.55.
Oil lost ground for the fifth time in the last six days on Wednesday as traders reacted to hoped-for progress in Russia-Ukraine peace talks and a surprising increase in US inventories. Brent traded in a $6 range, between $97.55 and $103.70 before settling at $98.02, down $1.89 a barrel, or 1.9 percent.
The rupee jupmed 42 paise to close at a nearly two-week high against the US dollar on March 17. The domestic unit closed at 76.19 against its previous close of 76.61. Improved market sentiment and stable crude oil prices helped the Indian unit log gains.
In contrast to the trend of FII outflows prevalent for much of the past six months, foreign institutional investors (FIIs) net purchased Indian equities worth ₹312 crore on Wednesday, according to provisional exchange data. Net purchases by domestic institutional investors (DIIs), which have been buyers, stood at ₹772.6 crore.
Russian attack on Ukraine continues even as a UN Security Council meeting will take place on March 17 to discuss the onging war at the request of six western countries including the United States (US) and the United Kingdom (UK). “Russia is committing war crimes and targeting civilians. Russia’s illegal war on Ukraine is a threat to us all,” the UK's UN mission tweeted on Wednesday. Media reports suggested Russian President Vladimir Putin had said that he was ready to discuss neutral status for its neighbour but would still achieve the goals of its operation, which he said was "going to plan".
Gold prices fell on March 16 after the US Federal Reserve raised interest rates by a quarter of a percentage point. Gold April futures contact settled at $1909.20 per troy ounce with a loss of 1.06 percent and silver May futures contract settled at $24.71 per troy ounce with a loss of 1.79 percent. Gold is highly sensitive to interest rates, as an increase in rates increases the opportunity cost of holding non-yielding bullion, while boosting the dollar, in which it is priced.