Stocks climb as oil retreats, Fed calms inflation fears

Stock markets rose on Thursday after the US Federal Reserve raised interest rates as expected to cool inflation pressures, with falling oil prices also bolstering sentiment.

Wall Street rallied after the losses seen in the wake of the Fed's rate hike on Wednesday, while European indices also rose after a mixed performance in Asia.

The Fed lifted borrowing costs for the first time since 2023, defying President Donald Trump's demand for cuts, as its chairman Kevin Warsh insisted on the need to combat inflation he said had been "too high" for "too long".

The unanimous decision was announced along with a graph showing that the vast majority of Fed policymakers expected at least one hike more was probably necessary before the end of the year.

That reassured investors and kept the 10-year US Treasury bond yield -- a key indicator of borrowing costs throughout the world's biggest economy -- back below five percent.

"Investors took some comfort from the Fed standing firm in the face of Donald Trump's noisy demands for lower rates," said Susannah Streeter, chief investment strategist at Wealth Club.

And with Warsh making clear that "the fight against inflation is far from over, expectations of further tightening have strengthened", she said.

Adding to the optimism were hopes that Saudi Arabia would move quickly to increase crude shipments disrupted by the stoppage of its East-West pipeline to the Red Sea.

The East-West conduit, even more important since the effective closure of the Strait of Hormuz by Iran, was shut last week after being targeted by Yemen's Iran-backed Houthis.

"Saudi Arabia eased supply fears by offering additional crude to Asian refiners via ship-to-ship transfers off Oman's Sohar port, while working to restore roughly half of the damaged East-West pipeline's capacity within days," said Ipek Ozkardeskaya, an analyst at Swissquote.

Oil prices fell sharply as a result, though the Brent international crude benchmark remained above $100 a barrel.

Stocks in London rose after the Bank of England kept its benchmark interest rate steady as expected, as it tries to support economic growth despite rising energy costs.

But its governor, Andrew Bailey, said that as the Iran war persists, "the bigger the impact it will have on inflation, and the more likely it is we will need to raise" the benchmark rate.

The Bank of Japan is widely forecast to raise interest rates on Friday as it looks to fend off high inflation and a weaker yen.

The dollar largely held on to gains against its peers after rallying Wednesday on the back of the Fed move and Warsh's hawkish remarks, as higher rates make returns on US government bonds more attractive to international investors.

New York - Dow: UP 0.5 percent at 51,732.09 points

New York - S&P 500: UP 1.0 percent at 7,627.22

New York - Nasdaq: UP 1.5 percent at 26,378.26

London - FTSE 100: UP 1.2 percent at 10,816.14 (close)

Paris - CAC 40: UP 0.6 percent at 8,186.93 (close)

Frankfurt - DAX: UP 0. percent at 25,716.71 (close)

Tokyo - Nikkei 225: UP 0.3 percent at 64,136.25 (close)

Hong Kong - Hang Seng Index: DOWN 0.4 percent at 24,604.29 (close)

Shanghai - Composite: DOWN 0.4 percent at 3,875.60 (close)

Euro/dollar: UP at $1.1482 from $1.1464 on Wednesday

Pound/dollar: DOWN at $1.3351 from $1.3377

Euro/pound: UP at 86.00 pence from 85.69 pence

Dollar/yen: DOWN at 155.81 yen from 156.37 yen

Brent North Sea Crude: DOWN 2.2 percent at $103.51 per barrel

West Texas Intermediate: DOWN 1.8 percent at $100.61 per barrel