Stock markets around the world extended a relief rally into Friday, as falling oil prices helped calm inflation worries that had been weighing on investor sentiment for weeks.
The rally began on Wall Street after the Federal Reserve's rate increase Wednesday, with stocks jumping as bond yields and oil prices both declined and investors took some comfort that the Fed had followed through on its hawkish signaling rather than surprising markets. Technology shares led the gains, with the rebound helping stocks recover some ground lost during a recent bout of concern over lofty valuations in artificial intelligence-related companies. That momentum carried into Asian trading overnight, with Japanese, and other regional markets, following Wall Street higher even as the Bank of Japan delivered its own rate increase.
In London, the FTSE 100 gained 1.2% on Thursday to close at 10,816.14, with futures pointing to a steady open Friday, as investors weighed the Bank of England's decision to hold rates alongside falling oil and lower bond yields. In India, the Sensex and Nifty 50 both edged higher in early Friday trading, supported by the overnight technology-led rally on Wall Street and easing crude prices, even though foreign investors continued to sell shares and geopolitical tensions in the Middle East kept some caution in the market. Not every corner of the market shared in the good news: homebuilder Lennar fell early in the week after missing revenue and earnings expectations and lowering its full-year delivery guidance, citing deteriorating conditions in the housing market.
Taken together, the week's market moves reflect investors trying to balance two competing forces: central banks around the world raising or holding rates to fight inflation driven substantially by energy prices, against hopes that a cooling oil market and clearer central bank guidance could support growth and corporate earnings into year-end.
Why are stocks rallying despite the Fed raising rates?
Investors were reassured that the Fed's move matched expectations, and falling oil prices and bond yields helped offset concerns about the rate increase itself.
What is the 'AI valuation wobble' markets are recovering from?
It refers to a recent period of investor concern that some artificial intelligence-related stocks had become too expensive relative to their earnings, which briefly weighed on technology shares.