Asian and European stocks markets rallied Thursday, with a record high in Frankfurt, after the Federal Reserve announced a bumper interest-rate cut and pledged further reductions as inflation cools.
London鈥檚 FTSE 100 stocks index was up almost one per cent as it pared back some gains after the Bank of England held its own rate steady, as expected. The pound strengthened against the dollar.
In the eurozone, Paris surged 1.9 per cent while Frankfurt was up 1.5 per cent in early afternoon deals after briefly jumping above the 19,000-point mark for the first time. Tokyo closed up 2.1 per cent, with Hong Kong not far behind.
鈥楪lobal markets had been on edge ahead of the Fed decision, but... have seen a solid recovery in risk appetite鈥� thereafter, said Chris Beauchamp, chief market analyst at online trading platform IG.
The US central bank on Wednesday lowered borrowing costs for the first time since the start of the Covid pandemic by opting for a reduction of 50 basis points.
Its choice of an aggressive cut, as opposed to trimming rates by 25 basis points, split opinion among analysts, with some warning it could reignite inflation, while others said it showed the bank was keeping ahead of the curve in supporting the economy.
The bank鈥檚 鈥榙ot plot鈥� guidance indicated more sizeable easing over the next two years.
Fed boss Jerome Powell said the economy was in 鈥榞ood shape鈥�, pointing to lower inflation and solid growth.
鈥楾he labour market is in a strong place. We want to keep it there,鈥� he told reporters.
Beauchamp said Powell 鈥榮eems to have convinced investors that the recent weakness in jobs data was no reason to be concerned鈥�.
Wall Street was predicted to open with strong gains, having dipped following the Fed decision.
鈥楾here is a lot to digest and it鈥檚 understandable the market reaction was initially mixed,鈥� said Russ Mould, investment director at AJ Bell.
鈥楿S indices went up on the news, then pulled back and stayed flat, and now futures prices imply another leg up when Wall Street opens on Thursday.鈥�
The Bank of England on Thursday held its rate at five per cent, avoiding a second reduction in a row after having delivered its first cut in August.
BoE governor Andrew Bailey said the central bank needed 鈥榯o be careful not to cut too fast or by too much鈥�, as UK inflation stays above its target.
Norway鈥檚 central bank also opted to keep its policy rate unchanged, holding it at a 16-year high and warning that the first cut would only come in the first quarter of 2025.
