Volkswacht Bodensee - Europe stocks rally on Fed pivot, before ECB rate call

The dollar slid however, while investors awaited UK and eurozone monetary policy decisions.

Frankfurt's DAX index vaulted to 17,003.28 and the Paris CAC 40 struck 7,653.99, with the European Central Bank (ECB) expected later Thursday to pause again as euro-area inflation slows.

London's FTSE 100 rallied more than two percent with the Bank of England (BoE) also forecast to keep its key rate at a 15-year pinnacle as UK inflation declines yet remains elevated.

The British central bank's decision due is at 1200GMT followed by the ECB at 1245GMT.

The Federal Reserve, chaired by Jerome Powell, on Wednesday sprang a much-sought-after dovish pivot as inflation also comes down in the world's biggest economy, in news which continued to dominate markets on Thursday.

The greenback retreated across the board with the euro and pound enjoying fresh strength, while oil prices spiked about two percent to rebound from recent six-month lows.

- 'Monster rally' -

"The Fed lit the touch paper for a monster rally as it greenlit market expectations for rate cuts next year," said Finalto analyst Neil Wilson.

"This was a major pivot. The Fed did not just say it's done; it embraced a much more dovish view."

After more than a year of hiking, Fed decision-makers at their last meeting of the year acknowledged that they were winning their battle against rising prices and discussed when to change tack to a looser monetary policy.

The central bank held rates at a 22-year high, as expected, and said the decision lets policymakers determine "the extent of any additional policy firming that may be appropriate".

The addition of "any", which was absent in November's decision, was "an acknowledgement that we believe that we are likely at or near the peak rate for this cycle", Fed chief Jerome Powell told reporters.

Officials also released their "dot plot" of future rates, which saw 75 basis points of cuts in 2024 -- more than indicated in September.

Traders are betting on 140 basis points of cuts over the next year, Bloomberg News said.

- Rate-hike cycle 'is over' -

"While there had been some persistent doubts about the Fed's interest rate hikes, it has now become clear that the current cycle is over," noted ActivTrades analyst Ricardo Evangelista.

"Investors now want to know when the central bank will start cutting rates and how fast they will come down."

The news sparked a bullish surge on Wall Street, with the Dow ending at a record high of over 37,000, while the S&P 500 closed at a near two-year high.

Treasuries -- seen as a guide to future rates -- strengthened, with 10-year yields at a four-month low below four percent.

The upbeat mood carried through to Asia, where Hong Kong, Sydney, Seoul, Singapore, Taipei, Manila, Bangkok, Mumbai and Jakarta all climbed. But Shanghai dipped on Chinese economic worries and Tokyo dropped on the stronger yen.

- Key figures around 1050 GMT -

London - FTSE 100: UP 2.3 percent at 7,720.04 points

Paris - CAC 40: UP 1.4 percent at 7,638.57

Frankfurt - DAX: UP 0.8 percent at 16,903.08

EURO STOXX 50: UP 1.1 percent at 4,580.10

Tokyo - Nikkei 225: DOWN 0.7 percent at 32,686.25 (close)

Hong Kong - Hang Seng Index: UP 1.1 percent at 16,402.19 (close)

Shanghai - Composite: DOWN 0.3 percent at 2,958.99 (close)

New York - Dow: UP 1.4 percent at 37,090.24 (close)

Euro/dollar: UP at $1.0908 from $1.0874 on Wednesday

Dollar/yen: DOWN at 141.67 yen from 142.89 yen

Pound/dollar: UP at $1.2668 from $1.2618

Euro/pound: DOWN at 86.10 pence from 86.18 pence

West Texas Intermediate: UP 2.0 percent at $70.86 per barrel

Brent North Sea crude: UP 1.9 percent at $75.70 per barrel

S.Gantenbein--VB