Volkswacht Bodensee - Global stocks rise coyly as ECB, BoE press pause after Fed pivot

After a torrid series of rate hikes over the past two years to tether runaway inflation, the Bank of England joined the European Central Bank and the Federal Reserve in pausing on interest rates for the second straight meeting.

The Fed's suggestion of monetary easing starting next year sparked a major post-meeting rally Wednesday -- though it soon dissipated on European markets.

Wall Street was also coy Thursday with the Dow and the tech-heavy Nasdaq barely 0.3 percent up two hours into trading.

Frankfurt's DAX index and the Paris CAC 40 vaulted to all-time highs before retreating, with the German index ending the day just into the red while Paris added a meek 0.6 percent after the ECB, while holding fire on rates as expected, warned the inflation battle is not yet won.

ECB president Christine Lagarde warned that policymakers should not "lower our guard" in fighting inflation, dousing market hopes of early drops in interest rates next year.

She added rate cuts had not been discussed because of concern inflation could pick up again in the near term, while the ECB also cut its growth forecasts for this year and next.

London meanwhile ended 1.3 percent higher after the BoE decided to keep its key rate at a 15-year pinnacle of 5.25 percent as UK inflation declines yet remains elevated, indicating monetary policy will likely need to be restrictive for an extended period.

Amid such caveats, "there were no (market) fireworks," noted Craig Erlam, senior market analyst with Oanda, whose over-all conclusion was the central banks "didn't give investors much to get excited about."

For Richard Flax, chief investment officer at Moneyfarm, the ECB "seems to be posturing itself to ‘out-hawk’ the Fed, with Lagarde ruling out rate cuts until data turns conducive... This puts the ECB at odds with current market expectations of meaningful rate cuts in 2024."

Unlike the Fed, "the moment for discussions on cutting rates has not yet arrived," said Juliette Cohen, analyst with CPRAM.

The US Federal Reserve, chaired by Jerome Powell, Wednesday sprang a much-sought-after pivot as inflation comes down in the world's biggest economy.

The greenback retreated against the euro and pound, while oil prices spiked almost four 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."

- US rate-hike cycle 'is over' -

"Investors now want to know when the central bank will start cutting rates and how fast they will come down," said ActivTrades analyst Ricardo Evangelista.

In Asia, the upbeat mood lifted Hong Kong, Sydney and Seoul. But Shanghai dipped on Chinese economic worries and Tokyo dropped on the stronger yen.

- Key figures around 1650 GMT -

New York - Dow: UP 0.3 percent at 37,216.43

London - FTSE 100: UP 1.3 percent at 7,648.98 points (close)

Paris - CAC 40: UP 0.6 percent at 7,575.85 (close)

Frankfurt - DAX: DOWN 0.1 percent at 16,752.23 (close)

EURO STOXX 50: UP 0.3 percent at 4,542.29

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)

Euro/dollar: UP at $1.0951 from $1.0874 on Wednesday

Dollar/yen: DOWN at 141.54 yen from 142.89 yen

Pound/dollar: UP at $1.2766 from $1.2618

Euro/pound: DOWN at 86.14 pence from 86.18 pence

West Texas Intermediate: UP 3.7 percent at $72.04 per barrel

Brent North Sea crude: UP 3.6 percent at $76.89 per barrel

R.Fischer--VB