Stock Markets Rise On Eve Of US Inflation Data

Stock markets climbed Wednesday on the eve of highly anticipated US inflation data, with sentiment buoyed by easing geopolitical tensions between Russia and Ukraine.

Traders have also been cheered by the rollback of Covid restrictions in many nations, with London's FTSE 100 hitting a two-year high as tourism stocks have taken off.

Oil prices rebounded from losses the previous day as US data showed stocks fell when analysts had expected an increase.

Wall Street posted healthy gains, though the closely watched January US consumer price report due out Thursday could complicate traders' outlook.

The consensus is for another pop up from the four-decade-high of seven percent seen in December, though a big miss in either direction could have consequences for markets.

"Inflation figures from the US... will be a major influence on the direction of markets as the figures will be digested by the Federal Reserve in its next decision on whether to raise interest rates or not," said AJ Bell analyst Russ Mould.

A higher reading could pile pressure on the Fed to embark on a more aggressive tightening campaign -- but a weaker figure would temper those worries.

"The inflation data has continued to rise faster than many anticipated and we're now in a situation where central banks are racing to catch up and get to grips with price pressures," said Oanda analyst Craig Erlam.

"Many still expect we'll see an orderly return to inflation targets over the forecast horizon with moderate rate increases, but the risk of inaction becomes far greater than the alternative."

With speculation swirling over the Fed's plans to battle soaring prices, global equities have fluctuated wildly since the start of the year as traders try to position themselves for a series of interest rate hikes that are likely to begin in March.

The prospect of the removal of cheap cash -- which has pushed markets to record or multi-year highs -- has particularly hit tech firms as they are more susceptible to higher rates, though the Nasdaq ended up 2.1 percent on Wednesday.

Earlier in the day, Hong Kong jumped more than two percent thanks to a 6.8 percent surge in market heavyweight Alibaba after Japan's SoftBank allayed fears it was planning to offload some of its huge holdings in the e-commerce giant.

Alibaba had taken a hit earlier on speculation about the share sale, which compounded the Chinese firm's woes after suffering hefty losses owing to Beijing's crackdown on the tech sector.

Europe followed Asia's lead higher, with both Frankfurt and Paris posting gains of around 1.5 percent.

Market analyst David Madden at Equiti Capital credited Wall Street's newfound vigor to ebbing worries over both the Fed's course of action, and the possibility of war in Ukraine.

"The fear factor surrounding those potential outcomes has declined, hence why we are seeing indices drive higher again," he said.