Thursday Morning Briefing: Asia Rallies, Crude Gains
Asian equity markets gained for the sixth day as the U.S. Federal Reserve kept key interest rates unchanged but signalled that a rate hike in 2016 is still likely. Markets in Japan are shut on account of a holiday.
Markets in the U.S. rallied as the Fed opted to wait for further evidence of stronger inflation before raising rates. Central bank officials also scaled back expectations for interest rate hikes in 2017 from three to two.
The S&P 500 Index gained 1.1 percent, the biggest increase for a Fed day since December, when the central bank raised rates for the first time in a decade. The NASDAQ Composite gained one percent as well, as Fed Chair Janet Yellen said asset valuations are “not out of line with historical norms.”
The won strengthened as much as 1.7 percent as Asian bonds rallied while the dollar index remains little changed along with the yen that remained close to the highs of the month.
Oil regained the $45 per barrel mark after U.S. government data indicated that inventories fell to its lowest since February. Crude stockpiles fell 6.2 million barrels last week according to the Energy Information Administration. A Bloomberg survey had forecast a 3.2 million barrel gain for the week.
Elsewhere, Organization of the Petroleum Exporting Countries (OPEC) members Saudi Arabia and Iran met in Vienna ahead of the group’s meeting in Algeria next week. Disagreements between the two nations had derailed attempts to reach a supply agreement earlier this year.
Gold held on to its biggest gain in two weeks as the Fed lowered its outlook for long-term interest rates.
The SGX Nifty Index gained as much as 0.56 percent to 8,860 as of 7:00 am, indicating a positive start for Indian equities. The rupee will however have to contend with the unexpected current account deficit in the April to June quarter.