Volkswacht Bodensee - Equities rise as Powell soothes rate fears, oil close to $120

With the Russian invasion of its neighbour hammering all assets across the board as uncertainty reigns supreme, traders were given a much-needed shaft of light on Wednesday when the Fed boss eased concerns over its plans for tightening policy.

Powell told lawmakers he was in favour of a moderate pace of rate increases, with a 25-basis-point lift this month, as he tries to nurture the economic recovery while keeping a lid on prices, which are rising at their fastest pace in 40 years.

He warned that the "near-term effects on the US economy of the invasion of Ukraine, the ongoing war, the sanctions, and of events to come, remain highly uncertain".

The comments soothed concerns that officials could announce an aggressive 50-basis-point lift. The issue of Fed tightening has cast a pall over markets for months, bringing a near two-year rally to an abrupt end, and that has now been compounded by the Ukraine crisis.

Powell did, however, say the bank would remain "nimble" to events and would act more aggressively if needed down the line.

Meanwhile, St. Louis Fed chief James Bullard said he was for a "rapid withdrawal of policy accommodation", as Chicago president Charles Evans added that policy was currently "wrong-footed" and should be tightened.

Still, Powell's comments were able to "appease risk-markets by ruling out a 50 basis-points hike in March, while simultaneously promising inflation vigilance at following meetings", said Citigroup strategists William O'Donnell and Edward Acton.

Wall Street ended sharply higher with all three main indexes more than one percent up.

And Asia followed suit with Tokyo, Hong Kong, Sydney, Seoul, Taipei and Singapore leading healthy gains, though Shanghai and Mumbai edged slightly lower.

London and Paris rose at the open but Paris dipped.

The gains were also helped by news that Ukraine and Russian officials will hold second round talks to end the war.

But analysts warned of further volatility for some time as fighting continues to rage in Ukraine.

Widespread sanctions across the world against Russia threaten to put its economy on its knees, while Moody's and Fitch have slashed its rating to junk.

Meanwhile, the country's equities are to be removed from closely followed indexes by MSCI and FTSE Russell, further isolating Moscow from the global economy.

"It is clear the perpetual mega-bulls of the past two years are continuing to fight a rear-guard action, using their previously successful buy-the-dip playbook, refusing to accept that the central bank cookie jar is near empty and that Ukraine-Russia has changed everything," said OANDA's Jeffrey Halley.

While the war is making finance chiefs re-think their plans, central banks appear intent to keep on the tightening track for now, with the Bank of Canada on Wednesday announcing a rate rise.

The major source of angst for policy-setters is the spike in oil prices, which has been a key driver of inflation this year owing to narrow supplies and soaring demand and is now being amplified by the conflict in Europe.

On Thursday Brent continued to storm higher, at one point hitting $119.84 a barrel for the first time since early 2012. WTI touched $116.57 for the first time since 2008.

While world governments have not included Russian oil in their wide-ranging sanctions on Moscow owing to concerns about the impact on prices and consumers, trade has become increasingly tough as banks pull financing and shipping costs rise.

OPEC and other major producers, including Russia, refused Wednesday to lift output by more than their previously agreed amount, dealing a blow to hopes of an easing in supply pressures.

An agreement by the United States and 29 other countries to release 60 million barrels from their reserves has had little impact on the relentless rise in prices.

Other commodities are also elevated with European natural gas benchmarks and aluminium at records.

- Key figures around 0820 GMT -

Brent North Sea crude: UP 5.5 percent at $119.10 per barrel

West Texas Intermediate: UP 4.8 percent at $115.86 per barrel

Tokyo - Nikkei 225: UP 0.7 percent at 26,577.27 (close)

Hong Kong - Hang Seng Index: UP 0.6 percent at 22,467.34 (close)

Shanghai - Composite: DOWN 0.1 percent at 3,481.11 (close)

London - FTSE 100: UP 0.1 percent at 7,434.22

Euro/dollar: DOWN at $1.1098 from $1.1126 late Wednesday

Pound/dollar: DOWN at $1.3395 from $1.3405

Euro/pound: DOWN at 82.85 pence from 82.95 pence

Dollar/yen: UP at 115.70 yen from 115.51 yen

New York - Dow: UP 1.8 percent at 33,891.35 (close)

F.Pavlenko--BTB