Stock markets and oil prices rallied Friday, with investors largely pricing
in more interest rate hikes aimed at taming runaway inflation.
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The dollar slid as much as one percent versus the pound and euro after
recent hefty gains.
London's stock market jumped more than 1.5 percent in afternoon trading,
mirroring advances in Paris and Frankfurt, while the British capital's exchange
mourned the death of Queen Elizabeth II.
"We are deeply saddened at the passing of Her Majesty Queen Elizabeth
II," the London Stock Exchange said in a message posted on its website.
"Our sympathies and condolences are with The Royal Family."
The LSE is expected to shut on the day of the queen's funeral following her
death on Thursday.
"Markets are being very British about the whole thing, carrying on in a
fashion that I suspect she would have approved of," said IG analyst Chris
Beauchamp.
- Dollar off highs
-
The more confident mood across equity and oil markets was reflected in a
cooler dollar, which had surged to multi-decade highs against major peers in
recent weeks owing to the US Federal Reserve's hawkish tilt to tighter monetary
policy.
"There are hopes that the sharp rate increases from the Fed may already
have dampened demand, causing US inflation to weaken," said City Index and
FOREX.com analyst Fawad Razaqzada.
The greenback's softness came even after Fed chief Jerome Powell reasserted
the US central bank's determination to keep hiking interest rates to fight
prices, even at the cost of economic growth.
His warning that "we need to act now forthrightly, strongly"
followed comments from his deputy Lael Brainard, who said policymakers would
lift borrowing costs for as long as it takes to bring inflation down from
40-year highs.
Still, Wall Street ended in positive territory Thursday, putting markets on
course for a weekly gain and easing some pressure after hefty losses in August
caused by worries that rising rates would spark a recession.
Wall Street's main indices continued rising at the opening bell on Friday,
with the Dow climbing 0.5 percent.
In Asia, Hong Kong rose close to three percent heading into a long weekend.
Edward Moya, analyst at trading platform OANDA, said traders cheered as
"Powell stuck to his hawkish script and affirmed the commitment to tighten
policy until inflation is back towards their target."
There was also some cheer from news that inflation in China had eased
slightly in August, giving the government more room to introduce more
economy-supporting measures, though the recovery remains hostage to leaders'
strict zero-Covid strategy of growth-sapping lockdowns.
The euro was holding well above parity with the dollar, one day after the
European Central Bank announced its own 75 basis-point rise as it warned
inflation was "far too high" and likely to stay above target for
"an extended period".
ECB chief Christine Lagarde suggested policy would continue to be tightened
for some time.
The yen strengthened as officials began speaking up after the unit
approached a 32-year low versus the greenback.
The pick-up came after Bank of Japan chief Haruhiko Kuroda met Prime
Minister Fumio Kishida on Friday before saying "the rapid weakening of the
yen is undesirable".
The talks were seen as a sign of intent to act in support of the currency if
it continued to weaken.
- Key figures at
around 1330 GMT -
London - FTSE 100: UP 1.3 percent at 7,356.88 points
Frankfurt - DAX: UP 1.1 percent at 13,050.07
Paris - CAC 40: UP 1.2 percent at 6,201.29
EURO STOXX 50: UP 1.4 percent at 3,560.47
New York - Dow: UP 0.5 percent at 31,927.43
Tokyo - Nikkei 225: UP 0.5 percent at 28,214.75 (close)
Hong Kong - Hang Seng Index: UP 2.7 percent at 19,362.25 (close)
Shanghai - Composite: UP 0.8 percent at 3,262.05 (close)
Euro/dollar: UP at $1.0053 from $1.0001 on Thursday
Pound/dollar: UP at $1.1577 from $1.1500
Euro/pound: DOWN at 86.78 pence from 86.93 pence
Dollar/yen: DOWN at 142.51 yen from 144.07 yen
Brent North Sea crude: UP 2.9 percent at $91.75 per barrel
West Texas Intermediate: UP 2.9 percent at $86.00 per barrel
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