Global stock markets climb after rate decisions

LONDON: European and US stock markets rose on Thursday ater the European Central Bank and Bank of England raised interest rates, joining the US Federal Reserve in moving once again to cool sky-high inflation.

Gains by equities in London, Frankfurt and Paris accelerated ater the ECB and BOE each announced half-percentage-point rate hikes, steeper than the Fed’s increase.

The central bank said another such increase would come in March, saying it would “stay the course in raising interest rates significantly at a steady pace”.

Mathew Weller, global head of Research at FOREX.COM and City Index, called it a “decisive step to combat inflation and promote stability in the eurozone.”

“This move was widely anticipated by market analysts and reflects the improving economic conditions in the region,” he said.

Signs are growing the eurozone may have passed the worst of an economic shock, with inflation slowing from a peak in October and the single currency area eking out growth at the end of 2022. The half-point increase on Thursday and December follow two jumbo-sized increases of three-quarters of a percentage point.

Earlier on Thursday the Bank of England also hiked its interest rate by half a percentage point, marking the 10th increase in the key rate.

The central bank forecast a shallower-thanexpected UK recession this year as the country faces a cost-of-living crisis.

But BOE governor Andrew Bailey told a press conference that inflationary pressure was still there and it was “too soon to declare victory yet”.

Analysts at ING said that “ultimately, a recession is still likely -- albeit milder than first anticipated.”

In Asia the main equity indices closed mixed ahead of the European rate decisions, with investors unable to maintain an early rally -- despite a strong lead Wednesday from Wall Street fuelled by hopes the Fed’s campaign of interest rate hikes could be nearing an end.

Equities were also boosted by well-received earnings, including a record annual profit of $42.3 billion for British energy giant Shell, and sales dropping less than expected at Meta, owner of Facebook and Instagram.

Wall Street opened higher on Thursday, with the tech-heavy Nasdaq jumping more than two percent.

Tech firms had led a surge on the Nasdaq and S&P 500 indices Wednesday ater the US central bank unveiled a slower quarter-point increase in borrowing costs -- and also noted progress in bringing prices under control.

The decision to lit rates by the smallest amount in almost a year came ater a series of data points suggested the world’s top economy was slowing down, with US inflation at its lowest level since October 2021.

“Overall, the capital markets behaved as if they are confident in the idea that the Fed will be pausing its rate hikes soon and that a rate cut before the end of the year is not out of the question,” said market analyst Patrick O’hare at Briefing.com.

Oil prices were steady on Thursday as looming sanctions on Russian oil products added uncertainty over supply but the dollar lost value in a boost to the oil trade.

Brent crude futures fell 18 cents, or 0.2%, to $82.66 a barrel by 1415 GMT while West Texas Intermediate (WTI) U.S. crude futures lost 3 cents to $76.38.

Both benchmarks plunged more than 3% overnight ater U.S. government data showed a large build in oil stocks.

A European Union ban on Russian refined products is set to take effect on Feb. 5, potentially dealing a blow to global supply.

EU countries will seek a deal on Friday on a European Commission proposal to set price caps on Russian oil products ater postponing a decision on Wednesday because of divisions among member states, diplomats said.

The European Commission proposed last week that from Feb. 5 the EU apply a price cap of $100 a barrel on premium Russian oil products such as diesel and a $45 per barrel cap on discounted products such as fuel oil.

The US Federal Reserve raised its target interest rate by a quarter of a percentage point on Wednesday, yet continued to promise “ongoing increases” in borrowing costs as part of its batle against inflation.

“Inflation has eased somewhat but remains elevated,” the US central bank said in a statement that marked an explicit acknowledgement of the progress made in lowering the pace of price increases from the 40-year highs hit last year.