The Japan Times - Stocks climb as oil retreats, Fed calms inflation fears

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 the central bank's 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 more hike 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 could restore within days about half of crude shipments disrupted by the stoppage of its East-West pipeline to the Red Sea.

The 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 early in the day, then staged a partial recovery with Brent oil futures finishing down one percent at $104.82 per barrel.

Analysts at JPMorgan Chase no longer have a "baseline view" of where the market goes next in light of the US administration's willingness to live with $100 oil and other pain points that were initially seen as red lines that would prompt a US accord with Iran to reopen the Strait by June.

"Six months later, many of those lines have been crossed, yet the exit strategy is less clear, not more," wrote JPMorgan analysts.

"With no clear signals from either the US or Iran that they are prepared to de-escalate -- and absent a diplomatic breakthrough on September 24, when President Trump and President Xi are set to meet in DC -- the assumption that the disruption is temporary is becoming increasingly difficult to sustain."

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.

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

- Key figures at around 2020 GMT -

New York - Dow: UP 0.6 percent at 51,778.04 (close)

New York - S&P 500: UP 1.1 percent at 7,637.76 (close)

New York - Nasdaq: UP 1.7 percent at 26,418.30 (close)

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 0.7 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 $1.1480 from $1.1465 on Wednesday

Pound/dollar: DOWN at $1.3358 from $1.3381

Euro/pound: UP at 85.94 pence from 85.68 pence

Dollar/yen: DOWN at 155.96 yen from 156.26 yen

Brent North Sea Crude: DOWN 1.0 percent at $104.82 per barrel

West Texas Intermediate: DOWN 0.5 percent at $101.91 per barrel

M.Matsumoto--JT