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AFP

Business

Stocks and oil advance, ruble retreats

Oil Chris Beauchamp Russia Broadcom London US Federal Reserve VMware

China's premier has warned that the world's second-biggest economy was in some ways worse off than during the early days of the pandemic. ©AFP

London (AFP) - European and US stock markets rose Thursday on relief about the pace of interest rate hikes, while the Russian ruble slumped following a cut in the interest rate.

Meanwhile, oil prices surged above $117 a barrel, hitting levels not seen since March.

"Another attempt at a relief rally is underway across equities, with a fairly substantial bounce across European and US markets coming in the wake of last night’s Fed minutes," said Chris Beauchamp, chief market analyst at online trading platform IG.

In the United States, central bankers stressed their "strong commitment and determination" to bring raging inflation under control via further large interest rate increases, according to the minutes of the latest policy meeting released Wednesday.

With US inflation rising at the fastest pace in nearly four decades, the Fed's policy committee early this month hiked the key rate by a half point -- the biggest increase since 2000.

Most members said similar increases "would likely be appropriate at the next couple of meetings", according to the minutes.

"While these minutes didn’t really add much to the outlook for monetary policy, they did at least calm fears that a faster pace of tightening is on the way," said Beauchamp.

"But beyond bargain hunting there seems little concrete rationale for the bounce, which leaves investors wondering whether next week will see yet another dramatic reversal in stocks," he added.

Stock markets have taken a beating this year as central banks have begun to raise interest rates in order to curb the highest consumer price rises in decades.

Economists fear the hikes, combined with supply disruptions due to the Ukraine war and the coronavirus pandemic, could tip many countries into recession.

Bucking the trend on borrowing costs however, Russia's central bank on Thursday slashed its key interest rate following an emergency meeting, as authorities seek to rein in the ruble which has surged in value following the invasion of Ukraine.

The ruble, which Wednesday hit a seven-year dollar high, slumped seven percent after Russia cut its interest rate to 11 percent from 14.

The ruble has been buoyed by capital controls and high energy prices amid the Ukraine war.

Across Asia on Thursday, stock markets were mixed after Chinese Premier Li Keqiang's warning that the world's number two economy was in some ways worse off now than during the early days of the pandemic.

It comes as China persists with a zero-Covid policy to eradicate the fast-spreading Omicron virus variant despite the economic agony caused by lockdowns that have knocked global supply chains.

Recent economic data has shown that a series of pledges by Beijing to kickstart growth has essentially fallen flat owing to a lack of concrete action, while analysts said the easing of the Covid policy was the only thing investors wanted to see.

Meanwhile, the UK announced a £15-billion ($19 billion) support package for consumers hit by soaring energy bills, paid for in part by a windfall profit tax on oil and gas companies.

The announcement had little impact on the shares of both BP and Shell, both of which rose following the removal of uncertainty about the measure, and oil prices moved even higher.

In corporate news, chipmaker Broadcom announced a $61-billion deal to purchase cloud computing firm VMware, which is being called one of the biggest technology acquisitions ever.

Shares in Broadcom climbed 2.8 percent, while those in VMware rose 2.1 percent.