US and China take steps toward market stability while optimism increases over Russia-Ukraine negotiations, bringing new hope for global market recovery.
Global stocks have rallied, bolstered by China's pledge to help stabilise markets and another pullback in oil prices as the US Federal Reserve announced its first interest rate hike since 2018.
Optimism over talks between Russia and Ukraine also buoyed equities on Wednesday, analysts said, even as Kiev implored US lawmakers for more help to counter Moscow.
The interest rate hike marks an effort to counter spiking consumer prices even as Russia's offensive in Ukraine introduces new uncertainty in an economy battered by supply chain snarls and labor shortages.
Fed Chair Jerome Powell expressed confidence the world's largest economy could withstand the tightening of monetary policy, even as the central bank trimmed its growth forecast for 2022.
"We're not going to let high inflation become entrenched. The costs of that would be too high," Powell told reporters, adding the Fed is committed to using its "powerful tools" to prevent that.
'Gifts for embattled markets'
The Fed's message was consistent with market expectations, meaning the interest rate hike had already been priced in, said Art Hogan, chief strategist at National Securities.
He said markets also continued to gain strength from a significant pullback in oil prices, which had "got ahead of" themselves by surging shortly after Russia began its attack on Ukraine.
Earlier, Hong Kong's main equities index closed up more than nine percent after Chinese state media said authorities would maintain capital market stability and adopt measures to handle risks for troubled property developers.
Frankfurt, Paris and Milan stock markets closed more than three percent higher while London's FTSE 100 finished up 1.6 percent.
"Today has delivered a double-whammy of gifts for embattled markets," said Chris Beauchamps, chief market analyst at IG, on Wednesday. He was referring to the developments in China and the Ukraine-Russia talks.
On the same day, however, Kiev rejected Russian demands to impose neutrality on Ukraine, and Zelenskyy called on Washington and its NATO allies to impose a no-fly zone once again.
"The positive disposition is being attributed to reports that Russia and Ukraine may be making progress toward some compromises," said Briefing.com analyst Patrick O'Hare.
"Everyone has heard this before only to be subsequently disappointed with headlines later in the day that dispel such notions," he said.