Home » Featured Blocks » Stocks rally on inflation-fighting Fed, before more rate calls

Stocks rally on inflation-fighting Fed, before more rate calls

Stocks rally on inflation-fighting Fed, before more rate calls

LONDON: World stock markets rallied Thursday after the US Federal Reserve laid out inflation-fighting plans, and before crucial pre-Christmas interest rate decisions in both Britain and the eurozone.

Asian equities leapt after the Fed plotted a more hawkish path by speeding up the taper of its pandemic financial support and flagged a number of interest rate hikes over the coming years.

London rose 0.9 percent in late morning deals ahead of a 1200GMT announcement from the Bank of England, which is forecast to hold record-low rates as it balances decade-high inflation against Omicron fears.

Frankfurt rallied 1.5 percent and Paris won 1.0 percent before the European Central Bank’s decision due at 1245GMT.

Investors shrugged off surveys highlighting a December business activity slowdown in both Britain and the eurozone due to fallout from the Omicron coronavirus variant.

Wall Street jumped overnight after the Fed news removed a large amount of uncertainty, while oil prices advanced on strong US energy demand.

“Is the Santa Rally finally here? Markets certainly seem to have a spring in their step, with the major indices across Europe, Asia and the US all pushing forward,” said AJ Bell investment director Russ Mould.

“The US Federal Reserve’s monetary policy update last night has gone down well with the markets.

“The prospect of three US interest rate hikes in 2022 would suggest the central bank has a clear plan to not let inflation get out of control. Equally, it isn’t being too aggressive to trip up the economy.”

Central banks are grappling with red hot inflation fuelled by reopening economies, runaway energy prices, the supply crunch and resurgent commodities.

However they also remain on standby, should Omicron spark new lockdowns and shutter swathes of the world economy once more.

Fed policymakers said they would end their bond-buying programme in March, allowing them to begin hiking borrowing costs.

A closely watched gauge of likely rate moves suggests they could lift them six times before the end of 2023.

“Confirmation that the Federal Reserve is to tap slightly harder on the monetary brakes was both expected and well received, as investors appreciated the increased clarity of the road ahead,” added Interactive Investor analyst Richard Hunter.

Travel stocks push European shares lower

“The Fed left the door open not only to consider the impact of the Omicron variant as the economic damage becomes clearer, but also noting that maximum employment was required before hikes could be entertained.”

While the Fed news improved the mood, the surge in new Covid cases and the rise of the Omicron variant has fanned fears that containment measures will be ramped up, hitting holiday plans for millions and dealing another blow to the recovery.

In the latest move, France said it would tighten restrictions on travel to and from Britain to slow transmissions.

Almost 80,000 people in Britain tested positive for Covid-19 in a 24-hour period on Wednesday — the highest daily number since the pandemic hit.

Key figures around 1020 GMT

London – FTSE 100: UP 0.9 percent at 7,234.16 points

Frankfurt – DAX: UP 1.5 percent at 15,715.26

Paris – CAC 40: UP 1.0 percent at 6,996.11

EURO STOXX 50: UP 1.5 percent at 4,222.60

Tokyo – Nikkei 225: UP 2.1 percent at 29,066.32 (close)

Hong Kong – Hang Seng Index: UP 0.2 percent at 23,475.50 (close)

Shanghai – Composite: UP 0.8 percent at 3,675.02 (close)

New York – Dow: UP 1.1 percent at 35,927.43 (close)

Euro/dollar: UP at $1.1312 from $1.1289 late on Wednesday

Pound/dollar: UP at $1.3290 from $1.3262

Euro/pound: DOWN at 85.11 pence from 85.13 pence

Dollar/yen: UP at 114.14 from 114.04 yen

Brent North Sea crude: UP 0.9 percent at $74.55 per barrel

West Texas Intermediate: UP 1.0 percent at $71.60

Source: Business Recorder

Leave a Reply

Your email address will not be published.