Stocks climb as oil retreats, Fed calms inflation fears

Stock markets experienced a rally on Thursday, following the US Federal Reserve's rate hike on Wednesday, as investors sought reassurance amid inflation concerns. The Fed increased borrowing costs for the first time since 2023, despite pressure from President Donald Trump for lower rates. The unanimous decision to hike rates was backed by a graph showing that most Fed policymakers anticipated at least one more increase before the end of the year.

This decision helped keep the 10-year US Treasury bond yield below 5%, providing investors with a sense of security.

European indices also rose on Thursday, following a mixed performance in Asia. The rally in global markets was further supported by rising hopes that Saudi Arabia could restore about half of the crude shipments disrupted by the interruption of its East-West pipeline to the Red Sea. Saudi Arabia had offered additional crude to Asian refiners via ship-to-ship transfers off Oman's Sohar port and was working to restore roughly half of the damaged pipeline's capacity within days.

Oil prices saw a sharp decline early in the day but later staged a partial recovery, with Brent oil futures finishing down 1% at US$104.82 per barrel. However, analysts from JPMorgan Chase indicated that they no longer had a baseline view of where the market would go next due to the US administration's willingness to accept higher oil prices and other challenges. Despite the temporary nature of the oil supply disruption, the assumption that it would be resolved in the near term became increasingly difficult to sustain.

The rally in stock markets extended to London, where investors welcomed the Bank of England's decision to keep its benchmark interest rate steady. The bank aimed to support economic growth while tackling rising energy costs. Meanwhile, the Bank of Japan was widely expected to raise interest rates on Friday to combat inflation and a weaker yen.