Stocks climb as oil retreats, Fed calms inflation fears

On Thursday, stock markets saw a rise a day after the US Federal Reserve raised interest rates as expected to curb inflation. Falling oil prices contributed to the bullish sentiment. The Fed increased borrowing costs for the first time since 2023, despite President Donald Trump's call for cuts. Fed Chairman Kevin Warsh emphasized the necessity of combating inflation, citing its high levels for an extended period.

The unanimous decision included a graph indicating that most Fed policymakers expected at least one more rate hike before the year's end, reassuring investors and maintaining the 10-year US Treasury bond yield below 5%. Investors found some comfort in the Fed's firm stance against President Trump's demand for lower rates, stating that the fight against inflation is ongoing.

Additionally, hopes grew that Saudi Arabia could restore about half of the crude shipments halted by the East-West pipeline closure in the Red Sea, which occurred last week due to Yemen's Iran-backed Houthis. Saudi Arabia attempted to alleviate supply concerns by offering extra crude to Asian refiners via ship-to-ship transfers off Oman's Sohar port and working to restore roughly half of the damaged pipeline's capacity within days.

The oil prices initially fell sharply but later partially recovered, closing down 1% at US$104.82 per barrel. JPMorgan Chase analysts stated that they no longer have a baseline view of the market's future direction due to the US administration's willingness to accept US$100 oil and other pain points initially considered non-negotiable.

These factors led to a rise in London stocks, as the Bank of England kept its benchmark interest rate steady, aiming to support economic growth despite rising energy costs. The Bank of Japan is expected to raise interest rates on Friday to combat high inflation and a weaker yen.