The US Federal Reserve is widely expected to raise the federal funds rate by 25 basis points after the conclusion of a two-day monetary policy meeting today, 16 December 2015. The rally in U.S. and Europe overnight and Asian market today indicates markets are fully pricing in the expected Federal Reserve interest rate hike of 25 bps. Anything other than this should be a huge surprise and trigger great volatility in the financial markets. The US central bank has hinted that it intends to hike rates gradually.
A likely hike in U.S. interest rates would be the first hike in nearly a decade, and beginning of an end to an expansionary monetary policy that has supplied a tidal wave of liquidity to risk asset markets globally. With a hike seen as a mostly done deal after more than a year of anticipation, investor focus is fixed on how the Fed might opt to pace its tightening cycle next year. The central bank has hinted that it intends to hike rates gradually.
Fed Chair Janet Yellen and other officials at the U.S. central bank have signalled well in advance that they are likely to raise rates for the first time in nearly a decade. They've also strongly hinted that they'll keep the pace of any further increases gradual, as they try to avoid roiling financial markets that have become accustomed to easy credit. The decision comes as the U.S. economy comes back to full strength even while other big central banks are opting to keep the stimulus taps open to revive flagging growth in their economies.
The market participants and economists focus is now Fed's guidance in the accompanying statement on the future path of interest rate normalization.
Among Asian bourses
Australia market rebounds 2.4%
More From This Section
Australian share market ended sharply higher on Wednesday, 16 December 2015, as bottom fishing emerged on heavily battered stocks following yesterday's close at lowest level in two-and-half years. Meanwhile, positive finish of Wall Street overnight, as well as rebound in crude oil, base metal and bullion prices also aided risk sentiments. Most of ASX industry groups advanced, with rally being led by shares of materials, energy, realty, and financials issues. At the close, the benchmark S&P/ASX 200 index rebounded 118.80 points, or 2.42%, to finish at 5028.40 points. The benchmark index closed yesterday at 4909.60, a lowest level not seen since July 10, 2013, when it closed at 4901.40.
Shares of material and resources companies advanced amid rebound in base metal prices. Nickel led an advance in industrial metals, rallying from the biggest drop in more than a week amid a bullish outlook from investment banks. The metal used to make stainless steel increased 1.1% to $8,635 a metric ton. Copper and aluminium added 0.5% in London as zinc climbed 0.4%. Gold for immediate delivery gained 0.3% to $1,064.55 an ounce. Global miner BHP Billiton rebounded 5.6% to A$17.18, while rival Rio Tinto grew 3% to A$4.02. Smaller iron ore player Fortescue gained 5.3% to A$1.90. Gold miner Newcrest Mining jumped 1.4% to A$12.59 and Perseus Mining rose 1.5% to A$0.335.
Shares of Oil producers also traded higher, following the rally in crude prices overnight, with Oil and gas producer Woodside up 3.2% to A$27.05. Origin Energy up 3.9% to A$4.52 and Santos up 5.2% to A$3.45.
Domino's Pizza was up 10% to A$54.30 after announcing a deal to buy a local pizza chain in Germany and an earnings guidance lift.
Flight Centre added 2.5% to A$35.015 after announcing it was buying the US-based StudentUniverse.com group of companies specialising in student and youth travel.
Nikkei surges 2.6% from two-month trough
The Japanese share market rebounded from two-month low on Wednesday, 16 December 2015, taking cues from a strong finish on Wall Street overnight ahead of a key Federal Reserve meeting expected to see a long-awaited interest rate rise. All TSE industry groups, except Air Transportation advanced, with the day's notable gainers comprised Securities & Commodities Futures, Banks, Insurance, Transportation Equipment, Information & Communication, and Other Financial Business issues. The 225-issue Nikkei Stock Average advanced 484.01 points, or 2.61%, to 19049.91. The Topix index of all Tokyo Stock Exchange First Section issues jumped 38.17 points, or 2.54%, to 1540.72.
Shares of megabanks were among the biggest contributors to gains on the Topix, with Mitsubishi UFJ Financial Group Inc raising 3.7% and Mizuho Financial Group Inc gaining 5.3%. Sumitomo Mitsui Financial Group Inc was up 2.7%, after the Japan's second largest bank by revenue announced on Tuesday it concluded an agreement with General Electric to buy the latter's leasing business in Japan for 575 billion yen ($4.8 billion).
Shares of export-oriented players were also higher on bargain hunting after halt in yen appreciation against greenback. The yen traded at 121.72 per dollar after slipping 0.5% on Tuesday, boosting the outlook for export earnings. Toyota Motor Corp added 3.9%, Sony Corp 1.9%, and Mazda Motor Corp 3.5%. Uniqlo-operator Fast Retailing rose 1.2%. Subaru automaker Fuji Heavy Industries, which relies on North America for 60% of sales, grew 3.2%.
Japan Airlines Co. sank 2.3% after Agence France-Presse reported the carrier will suspend flights between Tokyo and Paris on lower demand following last month's terrorist attacks in the French capital.
China market ends marginally up
The Mainland China stock market finished marginally higher after trimming intraday gain late afternoon on Wednesday, 16 December 2015, as investors remain nervous before the Federal Reserve's decision over raising interest rates from near zero for the first time since 2006. Investors drew some encouragement early from news that China plans to issue significantly more government bonds next year to aid the economy, but sentiment was cautious ahead of the Federal Reserve's imminent rate decision. The Shanghai Composite Index advanced 0.17%, or 5.83 points, to close at 3516.19. The Shenzhen Composite Index, which tracks stocks on China's second exchange, grew 0.68%, or 15.40 points, to close at 2280.12. The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, rose 0.63%, or 17.41 points, to close at 2763.11.
The Chinese Academy of Social Sciences (CASS), a top government think tank, forecast that with moderate expansion in fiscal spending, China's economy was likely to grow between 6.6% and 6.8% in 2016.
Shares of energy and material companies rebounded strongly on bargain hunting after rebound in crude oil, base metal and bullion prices. Shares in China Petroleum & Chemical Corp were up 2%, while PetroChina Co was up 1% and China Oilfield Services rose 0.9%. Jiangxi Copper Co added 3.3% and Aluminum Corp. of China 1.2%.
Hong Kong market surges on Wall St. buoyancy
The Hong Kong stock market rose sharply on Wednesday, 16 December 2015, snapping nine-sessions losing streak, amid enhanced investor confidence after a continued rally in crude oil prices gave strength to U.S. equities overnight and the imminent U.S. interest rate decision set to remove a major uncertainty currently haunting markets. The city bourses declined for nine sessions in a row, triggering bargain hunting amid improving sentiment in global equity markets. The benchmark Hang Seng Index rebounded 426.84 points, or 2.01%, to 21701.21 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, rose 194.59 points, or 2.08%, to 9538.66 points. Turnover marginally decreased to HK$67.11 billion from HK$77.49 billion on Monday.
Shares of oil producers traded higher, following the rally in crude prices overnight and after the Chinese government said it would "postpone" expected cuts in retail petrol and diesel prices, aiming at restraining oil consumption and spurring environmental protection. PetroChina rose 5% to HK$5.30 and CNOOC gained 3.4% to HK$8.17.
Prada shares dropped 7% to HK$24.75 after the luxury goods maker reported a slump in its profit, weighed by falling sales in the Greater China region. The company's profits declined 38% on-year in the quarter ended October 31.
Telecom stocks lead Sensex rally
Indian stock market was trading stronger in afternoon trade, with telecom leading the rally. Gains in overseas stocks aided the upmove on the domestic bourses. At 13:17 IST, the barometer index, the S&P BSE Sensex was up 205.07 points or 0.81% at 25,525.51. The 50-unit Nifty 50 index was currently up 62.10 points or 0.81% at 7,763.
Rural Electrification Corporation (REC) rose after a large bulk deal of 32.82 lakh shares was executed on the scrip at Rs 218.65 per share at 09:51 IST on BSE today, 16 December 2015. Arcotech gained after the company announced that it has received an order worth Rs 268.30 crore with an option of another 25% order making it an aggregate order of Rs 335.37 crore, from India Government Mint, Mumbai. The announcement was made after market hours yesterday, 15 December 2015.
Meanwhile, Finance Minister Arun Jaitley reportedly said today, 16 December 2015, that the proposed Goods and Services Tax (GST) rate would be much less than 18%. Jaitley's comments on the GST rate come after a committee headed by Chief Economic Adviser Arvind Subramanian on possible tax rates under goods and services tax (GST) in its report submitted to the government early this month suggested standard GST rate at 17% to 18%. Typically, the majority of the goods and services will be taxed at the standard rate under the GST regime. The Finance Minister was also quoted as saying that the demand to scrap the 1% levy under the GST Bill is fair. The GST constitutional amendment bill has been stuck in the Rajya Sabha where the BJP-led NDA lacks a majority. A constitutional amendment bill requires a majority of two thirds in the house for its passage. The bill has been passed by the Lok Sabha. GST, touted as the single biggest indirect taxation reforms since independence, will simplify and harmonise the indirect tax regime in the country.
Elsewhere in the Asia Pacific region: Taiwan's Taiex index rose 1.4% to 8184.66. South Korea's KOPSI grew 1.9% to 1969.40. New Zealand's NZX50 added 0.5% to 6070.94. Indonesia's Jakarta Composite index grew 0.1% to 4378.92. Malaysia's KLCI jumped 0.6% to 1632.90. Singapore's Straits Times index gained 1% at 2842.75.
Powered by Capital Market - Live News