US Fed raises interest rates

As per data made available, the previous rate hike by the USA central bank in May had a 0.77 per cent upward impact on the BSE Sensex, while the decision to hold rates in March was impacted by 0.64 per cent.

The revision came just after the Fed raised interest rates Wednesday for the 2nd time in 3 months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing USA economy and strengthening job market. The Federal Reserve has raised its key inte.

In London the Bank of England surprised markets when three out of eight rate setters voted to hike the Bank Rate at the latest meeting, signaling an about-turn on its decision to cut rates and restart its legacy bond buying program in the wake of the Brexit referendum last August. Higher rates make it more expensive for companies and consumers to borrow money, affecting everything from loans to credit card rates to home mortgages.

Crude oil prices were listless after having slumped almost 4 per cent to their lowest close in seven months on Wednesday, on an unexpected large build in gasoline inventories.

The US unemployment rate fell to a 16-year low of 4.3 percent in May, but the Fed's preferred measure of underlying inflation has been running below target for more than five years and in April slowed a second month to 1.5 percent.

Stock indexes around the world fell on Thursday as technology shares resumed their recent sell-off, while the prospect of tighter monetary policy in the United States and Britain pushed up the dollar.

Normally, the Fed raises interest rates to combat inflation.

ANALYST VIEWPOINT: "Asian markets were seen broadly lower this morning, taking little cues from overnight markets". Many U.S. stocks will be vulnerable to an ongoing tightening in financial conditions especially those with overstretched valuations. That spurred selling of real estate developers' shares. In reaction to the hike, the 10-year yield hit a low of 2.103 percent, its lowest level since November 10, 2016. The rest of the surveyed experts predicted a rate hike by 25 basis points to 1-1.25 percent. The Dow Jones industrial average rose 0.2 percent, to a record 21,374.56. Home Depot and Goldman Sachs contributed most of the blue-chip index's gain. The S&P 500 lost 15.26 points, or 0.63 percent, to 2,422.66.

ENERGY: Oil futures plunged overnight after the USA government said oil supplies shrank only slightly last week while gasoline stockpiles grew.

Brent crude futures slipped another 0.4 per cent in early Asian trade to US$46.83 per barrel, near a five-month low of US$46.64 touched in early May. It fell $1.73, or 3.7 percent, to settle at $44.73 a barrel in NY.

Brent crude, the worldwide benchmark, was down 12c a barrel at $46.88.

  • Zachary Reyes