Stocks labour to extend Fed-fuelled rally

World stock markets laboured Friday to build on the previous day's rally as investors recalibrated their outlook for 2024 after the Federal Reserve held rates but indicated it would cut next year.

Asia mostly advanced but the Dow was just off shortly after opening on Wall Street, while Europe tempered gains on news of slumping eurozone business activity and London shed almost 1 percent.

Markets faced a busy week for global interest rates after the Federal Reserve pivoted Wednesday to signal it would cut next year. Both the Bank of England and the European Central Bank distanced themselves on Thursday from cutting any time soon.

New York federal reserve President John Williams added to the caution in telling CNBC that "we aren't really talking about rate cuts right now."

The dollar wavered after diving in initial reaction to the Fed's plans, while oil prices dipped a day after spiking more than three percent in value.

The BoE and ECB Thursday froze borrowing costs, in line with the Fed, but both warned that fight against inflation was not over and doused any hopes of early rate cuts next year amid frenzied talk of as many as half a dozen by the Fed.

- 'Pivot party' -

"The ECB and the BoE refused to join the Fed-thrown pivot party," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"Both (ECB president) Christine Lagarde and (BoE governor) Andrew Bailey declined to discuss cutting interest rates judging a policy loosening too early as the inflation threat looms," she added, noting also that Norway had sprung a surprise rate hike.

"As a result, the rally in global stock and bond markets slowed."

Nevertheless, the Fed's more-dovish-than-expected pivot has set up equities for a Santa rally, with a string of data suggesting inflation in the world's top economy was being tamed while avoiding recession.

Now the debate turns to the timing of the first cut and how many there will be, with some experts suggesting there could be more than the three envisaged in the Fed's "dot plot". JPMorgan economists see five.

The prospect of borrowing conditions being easier next year helped push the Dow to a second straight record high Thursday, while the S&P 500 is just shy of its own all-time peak.

Asian indices were also buoyed by news that China had injected more cash than expected into the financial system.

Officials also relaxed some home-buying rules in Shanghai and Beijing in a fresh bid to support the country's battered property sector.

Hong Kong led the advances, surging more than two percent, while Tokyo rebounded from the previous day's loss as the yen's rally against the dollar faded, though Shanghai gave up early gains to end down.

Dealers are now keenly awaiting the Bank of Japan's policy decision next week after boss Kazuo Ueda suggested officials could soon move away from their ultra-loose policy.

- Key figures around 1500 GMT -

New York - Dow: DOWN 0.2 percent at 37,190.66

London - FTSE 100: DOWN 0.9 percent at 7,575.82 points

Paris - CAC 40: UP 0.4 percent at 7,602.74

Frankfurt - DAX: DOWN 0.1 percent at 16,737.49

EURO STOXX 50: UP 0.2 percent at 4,547.39

Tokyo - Nikkei 225: UP 0.9 percent at 32,970.55 (close)  

Hong Kong - Hang Seng Index: UP 2.4 percent at 16,792.19 (close)

Shanghai - Composite: DOWN 0.6 percent at 2,942.56 (close)

Euro/dollar: DOWN at $1.0922 from $1.0996 

Dollar/yen: DOWN at 141.75 yen from 141.87 yen

Pound/dollar: DOWN at $1.2715 from $1.2764

Euro/pound: DOWN at 85.91 pence from 86.12 pence

West Texas Intermediate: DOWN 0.6 percent at $71.14 per barrel 

Brent North Sea crude: DOWN 0.4 percent at $76.30 per barrel