Star Metro - Stocks rally before key Fed update

Wall Street's main indices snapped higher at the opening bell, rebounding from losses on Tuesday. The Dow climbed 0.9 percent, with the broader S&P 500 rising 1.6 percent and the tech-heavy Nasdaq Composite jumping 2.5 percent.

The major European indices were also strongly higher.

After weeks of uncertainty, the US central bank delivers Wednesday its views on the state of the world's top economy and how officials plan to tackle decades-high inflation without knocking its recovery off course.

While Fed boss Jerome Powell has pledged that interest rate rises would be carefully calibrated, the prospect of higher borrowing costs has rattled markets across the world.

Most key indices have been deep in the red from the start of the year -- with Wall Street particularly hard hit.

Powell's comments Wednesday will be pored over for signs of the Fed's plans, which most commentators believe include a first hike in March.

"The big question going into this meeting for traders and investors is whether the Fed will increase... four times this year and when the first interest rate hike will take place," said Naeem Aslam, chief market analyst at Avatrade.

- Market buzz -

Part of the market's exuberance may also be speculation that Powell may tone down his remarks about the need to aggressively raise interest rates.

"There is even some buzz that Fed Chair Powell won't sound as hawkish as feared when he holds his press conference," said analyst Patrick J. O'Hare at Briefing.com.

"That view may come back to bite the market," he added.

Despite recent stock market volatility due to concerns over interest rate hikes, analysts believe investors remain relatively upbeat about the prospects for the global economy once the current wave of the Covid-19 pandemic wanes.

"Providing (a) boost to the stock markets is optimism that the economic recovery is going to speed up in the months ahead," said Fawad Razaqzada at ThinkMarkets.

Pent up demand for holiday travel will be unleashed as "travel restrictions continue to ease across Europe as Omicron cases decline and more people get double or triple vaccinated," he added.

Nevertheless, authorities are currently downgrading growth forecasts as the impact of the Omicron variant becomes clear.

Germany on Wednesday trimmed its 2022 growth forecast to 3.6 percent, down from 4.1 percent.

The International Monetary Fund on Tuesday lowered its growth outlook for the global economy saying it has started the year "in a weaker position than previously expected".

It said Omicron threatened to set back the recovery as countries impose containment measures, while other issues remained, including inflation and geopolitical tensions.

Included in those tensions is the standoff on the Ukraine-Russia border, with Moscow building up troop numbers and the West led by the United States warning the risk of an invasion "remains imminent".

US President Joe Biden said such a move would prompt "enormous consequences" and even "change the world", adding that he would consider imposing direct sanctions on Russian counterpart Vladimir Putin on top of a raft of measures being drawn up.

- Key figures around 1430 GMT -

London - FTSE 100: UP 1.8 percent at 7,504.16 points

Paris - CAC 40: UP 2.5 percent at 7,006.84

Frankfurt - DAX: UP 2.3 percent at 15,475.54

EURO STOXX 50: UP 2.3 percent at 4,172.30

New York - Dow: UP 0.9 percent at 34,617.19

Tokyo - Nikkei 225: DOWN 0.4 percent at 27,011.33 (close)

Hong Kong - Hang Seng Index: UP 0.2 percent at 24,289.90 (close)

Shanghai - Composite: UP 0.7 percent at 3,455.67 (close)

Euro/dollar: DOWN at $1.1288 from $1.1305 late Tuesday

Pound/dollar: UP at $1.3510 from $1.3507

Euro/pound: DOWN at 83.59 pence from 83.66 pence

Dollar/yen: UP at 114.24 yen from 113.87 yen

Brent North Sea crude: UP 1.3 percent at $89.37 per barrel

West Texas Intermediate: UP 1.1 percent at $86.50 per barrel

burs/rl/gw

A.Lavoie--SMC