Volkswacht Bodensee - Stocks rebound as US economy posts decades-high growth

European equity markets had mostly retreated in the morning session following sharp losses in Asia after US Federal Reserve chief Jerome Powell signalled Wednesday a likely rate increase in March to tame inflation.

But the mood changed after the US Commerce Department released Thursday data showing that the economy grew by 5.7 percent in 2021, its fastest rate since 1984.

Solid corporate earnings reports also helped this week, with several leading companies scoring higher profits despite ongoing pressures connected to Covid-19.

On Wall Street, the Dow Jones index was up 1.4 percent in late morning trading.

In Europe, London overturned earlier losses to close 1.1 percent higher. Paris and Frankfurt likewise overcame early sluggishness to post modest gains by the close.

Oil prices lost momentum mid-session after Brent North Sea crude had closed in on $91 per barrel.

Despite major markets moving back into the green, AJ Bell investment director Russ Mould sounded a note of caution regarding Powell's assessment.

"It's what he didn't say that troubled investors," Mould said.

"The key concerns are how aggressive the Fed will be with raising rates -- will they go up at every meeting this year, and will they go up by more than 0.25 percentage points each time?"

"Powell effectively admitted the Fed has been behind the curve and now must get its act together to get inflation to more acceptable levels. If that means upsetting financial markets, then so be it," said Fawad Razaqzada, market analyst with ThinkMarkets.

Fed officials still believe the price rises will be brought under control as economies reopen and supply chain problems abate, but the need to prevent them from running away is forcing them into an aggressive pivot.

"The tech-heavy Nasdaq had been hit hard by fears of a more hawkish Fed in the lead-up to the US central bank's rate decision, making this a case of 'sell the rumour, buy the fact'," said Fiona Cincotta, senior financial markets analyst at City Index, while noting "stellar" US growth data.

- Oil back under $90 -

Elsewhere, oil prices lost early momentum after benchmark European contract Brent closed in on $91 a barrel.

It fell back under $90, having risen on Wednesday above that level for the first time in seven years owing to rising Ukraine-Russia tensions and falling US crude stockpiles.

Eyes are now on the upcoming meeting of OPEC and other key producers, where they will discuss plans to continue to increase output.

"Energy traders are anticipating higher energy prices on potential geopolitical risks and as OPEC+ will stick to their plan to deliver another modest increase to production at next week's meeting," said OANDA's Edward Moya.

- Key figures around 1650 GMT -

New York - Dow: UP 1.4 percent at 34,653.06 points

EURO STOXX 50: UP 0.3 percent at 4,177.50

London - FTSE 100: UP 1.1 percent at 7,554.31 (close)

Paris - CAC 40: UP 0.6 percent at 7,023.80 (close)

Frankfurt - DAX: UP 0.4 percent at 15,524.27 (close)

Tokyo - Nikkei 225: DOWN 3.1 percent at 26,170.30 (close)

Hong Kong - Hang Seng Index: DOWN 2.0 percent at 23,807.00 (close)

Shanghai - Composite: DOWN 1.8 percent at 3,394.25 (close)

Euro/dollar: DOWN at $1.1152 from $1.1238 late Wednesday

Pound/dollar: DOWN at $1.3394 from $1.3458

Euro/pound: UP at 83.26 pence from 83.45 pence

Dollar/yen: UP at 115.42 yen from 114.64 yen

Brent North Sea crude: DOWN 0.2 percent at $89.74 per barrel

West Texas Intermediate: DOWN 0.2 percent at $87.15 per barrel

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L.Dubois--BTB