Following the Federal Reserve’s indication that it was nearing the end of its cycle of rate-tightening as inflation declines, stock markets and oil prices surged on Thursday, while the currency declined.
Following the US interest rate freeze by the Federal Reserve on Wednesday, traders in Asia and Europe took over from their Wall Street counterparts.
The major stock indices on Wall Street kept moving higher on Thursday, gaining over 1%.
As anticipated, Governor Andrew Bailey of the Bank of England stated that it was “much too early” to consider lowering interest rates.
Redmond Wong of Saxo Bank stated that there is “a sense that the Fed has come to an end of its rate hike cycle”.
For the second consecutive meeting, the US central bank kept interest rates at a 22-year high.
The Federal Reserve maintained a range of 5.25 to 5.5 percent for its benchmark lending rate.
“The process of getting inflation sustainably down to two percent has a long way to go,” Fed Chair Jerome Powell noted.
The US central bank, he said, was not considering lowering interest rates at all and still had the flexibility to raise them if circumstances demanded it.
However, according to market analyst Patrick O’Hare of Briefing.com, “the market thinks that is empty lip service that won’t ultimately translate into an actual rate-hike action.”
Following the ruling, US Treasury yields decreased as well, which was good news for equities, which had been down recently.
“The market was oversold and speculation was rising that it was due for a bounce from its oversold condition and, lo and behold, that is what is taking place,” stated O’Hare.
The dollar declined vs its rivals as prospects for future rate hikes decreased. Some analysts now estimate that there is just a 20% likelihood of an increase in December.
Notably, it retreated to little over 150 yen after briefly rising to a three-decade high of 152 this week due to the Bank of Japan’s policy adjustment not performing as expected.
Crude oil prices, which are expressed in US dollars, increased due to the weakening of the currency and the possibility of more lenient lending terms for businesses.
In recent days, the commodity has been declining on expectations that the war between Israel and Hamas would not spread throughout the Middle East, which is rich in crude oil.
Encouraged by positive corporate profits as well, equities in a number of European nations saw gains of over two percent during the afternoon, with Copenhagen seeing a three percent surge at one point due to positive outcomes from Novo Nordisk, a company that makes drugs to prevent diabetes and obesity.
Apple, which releases its earnings after the bell, garnered the most interest in the US. 1.6 percent of its shares increased during afternoon trade.