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Sterling slipped and stock markets held on to earlier gains after the Bank of England joined the Federal Reserve in hinting it may be nearing the end of its rate hike cycle.

The BoE’s half-a-percentage-point rise in interest rates was widely expected by investors, but the central bank’s announcement that any further hike would require evidence of “more persistent” inflationary pressures sent the pound briefly trading 0.5 percent lower against the dollar to 1,232 dollars. after the decision.

The moves followed earlier gains in European stocks and U.S. futures, built on Wednesday’s gains on Wall Street as investors reacted to Fed Chairman Jay Powell’s comments after a widely expected quarter-point hike in U.S. interest rates.

The regional Stoxx Europe 600, up 6 percent from last month, was up 0.5 percent, while London’s FTSE was up 0.6 percent just after midday. The European Central Bank is also expected to raise interest rates by half a percentage point later today.

In fixed income markets, the 10-year gilt yield fell 0.15 percentage point to 3.16 percent on higher debt prices.

Contracts tracking Wall Street’s benchmark S&P 500 rose 0.3 percent and those tracking the tech-heavy Nasdaq 100 rose 1.2 percent ahead of the New York open. Meta surged 20 percent in premarket trading on stronger-than-expected fourth-quarter earnings and CEO Mark Zuckerberg’s promise that 2023 would be a “year of efficiency.”

Stocks have risen and bond yields have fallen this year on optimism for stronger global growth and signs of cooling inflation, sending markets further buoyed on Wednesday by Powell’s comments, which investors viewed as belligerent.

“Reading between the lines [Powell’s] With the remarks, we see the first nascent steps toward an imminent pause in interest rate hikes after the expected March hike, and ultimately the pivot to rate cuts later this year,” Bank of America analysts said.

The S&P 500 rose to its highest level since August on Wednesday after the Fed decided to raise interest rates by a quarter of a percentage point, ending a run of half and three-quarter point swings and raising the federal funds rate to 4.75 from 4.5 percent. .

Traders bought government bonds, which have risen so far this year, pushing the benchmark 10-year Treasury yield down to 3.40 percent on Thursday. Bond yields fall when prices rise.

The dollar index, which tracks the U.S. currency against a basket of six currencies, traded flat, down more than a tenth over the past three months, as the pace of interest rate hikes slowed.

Markets expect the Fed to repeat Wednesday’s move when officials meet in March, and Powell gave investors little reason to think otherwise during a question-and-answer session with reporters later in the day, insisting that “a continued increase in the target range would be appropriate.”

Powell acknowledged that “deflation has begun for the first time” in consumer goods, which markets are interpreting as distress, but he added that inflation has yet to show up in the ex-housing portion of the core services price index. Despite slowing economic growth, the labor market remained “extremely tight,” Powell said.

However, unlike the Fed, markets expect the March rate hike to be the last for the central bank and are pricing in a rate cut in late 2023. “We’ll just have to see,” Powell said.

Analysts at Barclays said Powell’s press conference “sent mixed messages, reiterating that the committee’s work is not done but showing reluctance to lean against easing financial conditions.”

In Asia, Hong Kong’s Hang Seng was down 0.5 percent, China’s CSI 300 was down 0.3 percent and Japan’s Nikkei was up 0.2 percent.


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