Asian and U.S. stock markets extended their gains on Wednesday, seeing Asian benchmarks rise to three-week highs prior to the Federal Reserve’s interest rate decision scheduled for 1800 GMT today.
The markets have been expecting the Federal Reserve to raise interest rates as soon as the American economy began to show consistent signs of recovery. However, the recent turmoil in global markets is likely to limit the move to a tighter market on a global scale, making it unlikely that other major market players raise interest rates as well.
The European Central Bank, for example, is likely to continue its expansion policy in its attempts to sustain growth in the eurozone. MSCI's broadest index of Asia-Pacific shares outside Japan (NYSE:EPP) added 0.8%, bringing the index up to its highest level in three weeks. The Japanese Nikkei average gained 1.43% and Australian shares added 1%.
U.S. stocks extended their gains on Wednesday and closed near-session highs in a tight-range trading session ahead of the Fed interest rate decision. The Standard & Poor’s 500 Index gained 17.22 points, or 0.9%, to trade at 1,995.31 as the index stayed within a tight 19-point range. The energy sector led the gains as oil prices surged nearly 6%. The Dow Jones Industrial Average rose 140.1 points, or 0.8%, to close the day at 16,739.95 as trading was kept within a 140-point range. The NASDAQ Composite remained within a 45-point range as it rose 28.72 points, or 0.6%, to trade at 4,889.24. All three benchmarks remained within a range the size of around 1% of their value, indicating traders reluctance to place any big bets prior to the Federal Reserve’s press conference later today.
Crude oil prices rallied 5.7% as they were lifted by an unexpectedly large drop in weekly crude stockpiles, as revealed by the Energy Information Administration’s (EIA) report on Wednesday. Along with news of a sharp decline in the number of active oil rigs, the report has raised expectations that the current supply glut is likely to cease in the future, seeing energy prices recover from their 60% decline in 2015. Stockpiles fell by 2.1 million barrels last week despite analysts expectations of a 1.1 million barrel increase. Crude oil rose 4% in under an hour after the EIA report was released and continued to climb during the day and is currently trading near $47 a barrel.
The Federal Reserve will announce its interest rate decision today at 1800 GMT after months of speculation. U.S. borrowing rates haven’t been raised in nearly a decade, bringing a lot of focus on the decision.