STOCK markets and oil prices jumped while the dollar slid yesterday after the Federal Reserve hinted it was at an end of its rate-tightening cycle as inflation retreats.

Asian and European traders picked up the baton from their Wall Street counterparts after the Fed froze US interest rates Wednesday. 

Wall Street’s main stock indices continued pushing higher yesterday, rising by more than 1%.

There is “a sense that the Fed has come to an end of its rate hike cycle”, said Saxo’s Redmond Wong.

The Bank of England, as expected, kept its key interest rate steady as well on Thursday, although Governor Andrew Bailey said it was “much too early” to think about cutting rates.

This came after the US central bank held interest rates at a 22-year high for a second straight meeting, keeping its benchmark lending rate between 5.25% and 5.5%.

However, Fed Chair Jerome Powell cautioned that “the process of getting inflation sustainably down to 2% has a long way to go.”

He added that the US central bank was not at all thinking about rate cuts and maintained the option to hike them if developments warrant.

“Powell hinted that the Fed was nearing end of its rate tightening cycle,” said Adam Sarhan of 50 Park Investments. “He didn’t say it directly but he hinted and the fact that he hinted was enough for the market to rally.”

Yields on US Treasuries fell after the decision, also positive for stocks which have slid in recent months.

Analysts said stocks have been primed for a bounce after selling off in recent weeks. The November and December period is also known as a seasonally good stretch of the calendar. 

The drop in future rate-hike expectations – some put the chances of a December lift at about only 20% – saw the dollar slide against its peers.

Notably, it eased to just above 150 yen, having surged towards a three-decade high 152 at one point this week after a Bank of Japan policy tweak fell short of what some had forecast.

The softer dollar and the prospect of easier financial conditions for companies pushed up crude oil, which is priced in the greenback.

The commodity had been falling in recent days on hopes that the Israel-Hamas conflict would not widen across the crude-rich Middle East.

“The weaker US dollar along with the broader improvement in the risk mood is helping to boost oil prices, as optimism about the demand outlook improves from the pessimism at the start of the week,” said analyst Michael Hewson at CMC Markets.

Buoyed also by corporate earnings, stocks in several European countries spent much of the afternoon up more than two%, with Copenhagen rising by three% at one point thanks to strong results by anti-obesity and anti-diabetes drug maker Novo Nordisk.

In the United States, markets are looking ahead to today’s government jobs report for October. 

Analysts expect the US economy added 175,000 jobs and that unemployment held steady at 3.8%.

Key figures around 2040 GMT

New York - Dow: UP 1.7% at 33,839.08 (close)

New York - S&P 500: UP 1.9% at 4,317.78 (close)

New York - Nasdaq: UP 1.8% at 13,294.19 (close)

London - FTSE 100: UP 1.4% at 7,446.53 (close)

Frankfurt - DAX: UP 1.5% at 15,143.60 (close)

Paris - CAC 40: UP 1.9% at 7,060.69 (close)

EURO STOXX 50: UP 1.9% at 4,169.62 (close)

Tokyo - Nikkei 225: UP 1.1% at 31,949.89 (close)

Hong Kong - Hang Seng Index: UP 0.8% at 17,230.59 (close)

Shanghai - Composite: DOWN 0.5% at 3,009.41 (close)

Dollar/yen: DOWN at  ¥150.48 from  ¥150.95 on Wednesday

Euro/dollar: UP at US$1.0626 from US$1.0570

Pound/dollar: UP at US$1.2204 from US$1.2152 

Euro/pound: UP at 87.04 pence from 86.98 pence

Brent North Sea crude: UP 2.6% at US$86.85 per barrel

West Texas Intermediate: UP 2.5% at US$82.46 per barrel – AFP, November 3, 2023.