As widely expected, the US Federal Reserve Bank (Fed) raised its interest rate by 25 basis points to 0.50% on Wednesday night. This is the first time since 2018 that borrowing costs have been increased. Moreover, Trading Economics reported that “the Fed now sees rate hikes at each of the six remaining meetings this year, with the fed funds rate reaching 1.90% by year’s end.”

Peace talks between Russia and Ukraine also continued, with both parties showing signs that a favourable compromise could be reached. Russia’s main demand at the moment is for a “neutral” Ukrainian status. The cost of the invasion and subsequent sanctions on Russia’s economy almost pushed the government to its first international debt default since the Bolshevik revolution that started in 1917.

In China, Vice Premier Liu He called for “market-friendly policies to support the economy” and warned against introducing market-damaging measures and that officials would be held accountable. “All policies that have a significant impact on capital markets should be coordinated with financial management departments in advance to maintain the stability and consistency of policy expectations,” Liu said on Wednesday.

After reaching record lows last seen in 2008, the Hang Seng soared after Liu’s remarks by over 9%. The Shanghai also enjoyed renewed sentiment, closing up over 3% from a 21-month low. The boost in Chinese stocks had Japanese investors slightly wary, however, the Nikkei still ended the day in the green following overnight Wall Street gains and an oil price drop.

In Europe, investors were optimistic, pushing the pan-European STOXX 600 by 3.10% to its highest level since 28 February 2022. US investors welcomed the Fed’s decision as Wall Street closed up, with all three major indices gaining over 1% for the day. “Historical data suggests tighter monetary policy has often been accompanied by solid gains in stocks,” Reuters reported.

Locally, the JSE ended a 3-day losing streak climbing 4.04%, its biggest single-day gain since March 2020, with Naspers and Prosus jumping 20.93% and 21.07%, respectively, on the back of promises from the Chinese state council.

Looking at commodities, bullion lost some steam after the Fed’s interest rate decision announcement and in light of the Russian-Ukrainian discussions possibly progressing. Brent crude also traded slightly lower due to the peace talks and as China reinstates lockdown measures on the back of growing Covid-19 infections. However, the International Energy Agency (IEA) said that markets could lose 3 million barrels per day (bpd) of Russian oil next month, above the anticipated 1 million bpd demand drop due to the price jump.