Stocks rally as Fed eases fears of bigger rate hike

·3-min read
Markets ralled after the US Federal Reserve played down chances of a huge interest rate hike in the near future (AFP/Jim WATSON) (Jim WATSON)

Stock markets rallied Thursday after the Federal Reserve played down chances of an even bigger US interest rate hike in the near future.

Oil prices steadied, one day after big gains as the European Commission proposed a gradual ban on Russian crude over Moscow's invasion of Ukraine.

The Federal Reserve on Wednesday announced an expected half-point lift in borrowing costs -- the biggest since 2000 -- as part of its battle to rein in inflation.

However, traders were given some much-needed cheer when Fed boss Jerome Powell said a 75 basis-point rise, which had been flagged by many observers, was not being considered.

"Relief has rippled through the financial markets as the Federal Reserve seems committed to keep to the path it had mapped out to try and tame roaring inflation," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

The Fed has also indicated that it will start rolling back its massive stimulus programme by offloading bonds from its balance sheet "on a more gradual incline than some feared", Streeter added.

On Wall Street Wednesday following the Fed update, all three main indices closed up by about three percent thanks to a surge in tech firms, which are most susceptible to higher rates.

Strong gains in New York filtered through to Asia and Europe on Thursday.

At 1100 GMT, the Bank of England is expected to announce a fourth straight hike to its main interest rate as UK inflation sits at the highest level in 30 years.

News that Turkish inflation soared to 70 percent in April highlighted the battle central bankers face in controlling prices.

- OPEC+ decision -

Inflation has been dragged higher globally in large part owing to surging energy prices.

OPEC+ members meeting on Thursday are expected to agree a marginal increase in oil production as tight supply concerns caused by the Ukraine war are offset by lower demand risks triggered by China's renewed Covid lockdowns.

OPEC+ includes members of the OPEC oil producers cartel, notably Saudi Arabia, as well as key energy producer Russia.

Traders on Thursday digested also earnings updates from some of the world's biggest companies.

Shares in Airbus soared more than seven percent in Paris after the European aircraft maker said late Wednesday that its net profit more than tripled in the first quarter to 1.2 billion euros ($1.3 billion), despite the impact of sanctions against Russia.

The results confirm the company's recovery after the Covid-19 pandemic slammed the air travel industry in 2020.

- Key figures at around 0945 GMT -

London - FTSE 100: UP 0.8 percent at 7,551.92 points

Frankfurt - DAX: UP 1.3 percent at 14,156.82

Paris - CAC 40: UP 1.5 percent at 6,493.45

EURO STOXX 50: UP 1.2 percent at 3,771.35

Hong Kong - Hang Seng Index: DOWN 0.4 percent at 20,793.40 (close)

Shanghai - Composite: UP 0.7 percent at 3,067.76 (close)

New York - Dow: UP 2.8 percent at 34,061.06 (close)

Tokyo - Nikkei 225: Closed for a holiday

Brent North Sea crude: UP 0.2 percent at $110.34 per barrel

West Texas Intermediate: DOWN 0.1 percent at $107.72 per barrel

Euro/dollar: DOWN at $1.0598 from $1.0625 on Wednesday

Pound/dollar: DOWN at $1.2567 from $1.2632

Euro/pound: UP at 84.33 pence from 84.06 pence

Dollar/yen: UP at 129.63 yen from 129.05 yen

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