San Francisco Frontiers - Stocks, dollar mixed before Fed rate call

Oil prices rallied on lingering fears that the Israel-Hamas war could turn into a wider conflict in the crude-rich Middle East.

The Fed was widely expected to keep borrowing costs on hold in an announcement late on Wednesday, with observers saying there was growing optimism that it has run its course after more than a year of rate hikes that have helped cool elevated inflation.

"The Fed is done, not just for this meeting, but for the cycle and the next move will be a rate cut," said Saxo Asia Pacific's Charu Chanana.

Hopes the Fed has finished hiking helped Wall Street, with all three main indices rising for a second straight session Tuesday.

The positive sentiment continued Wednesday, with Asia's main stock markets mostly ending higher and Europe opening higher.

Approaching the half-way mark, however, Europe posted slight losses.

Tokyo rallied more than two percent after the Bank of Japan (BoJ) stopped short of fully tweaking its monetary policy on Tuesday, even as it hiked inflation expectations.

Officials announced a minor change to its yield curve control programme, which allows bonds to rise and fall within a certain band, though there had been talk it would widen that band.

The news battered the yen, and on Wednesday it continued to fall, hitting 151.72 per dollar, its weakest level since touching a 32-year-low 151.95 in October last year and spurring an intervention.

The yen later recovered somewhat, having also struck a 15-year low against the euro.

The yen has tumbled in 2023 against its major peers as the BoJ refuses to budge from its ultra-loose policy, even as the Fed and other key central banks pushed interest rates to multi-decade highs to combat inflation.

But it picked up in early Asian trade after currency official Masato Kanda said Tokyo was ready to move if needed to step into forex markets.

"We're on standby," he told reporters. "But I can't say what we'll do, and when -- we'll make judgements overall, and we're making judgements in a state of urgency."

- Key figures around 1200 GMT -

London - FTSE 100: DOWN 0.2 percent at 7,308.04 points

Frankfurt - DAX: DOWN 0.1 percent at 14,791.98

Paris - CAC 40: DOWN 0.1 percent at 6,876.12

EURO STOXX 50: DOWN 0.2 percent at 4,051.30

Tokyo - Nikkei 225: UP 2.4 percent at 31,601.65 (close)

Hong Kong - Hang Seng Index: DOWN 0.1 percent at 17,101.78 (close)

Shanghai - Composite: UP 0.1 percent at 3,023.08 (close)

New York - Dow: UP 0.4 percent at 33,052.87 (close)

Dollar/yen: DOWN at 151.19 yen from 151.68 yen on Tuesday

Euro/dollar: DOWN at $1.0543 from $1.0576

Pound/dollar: DOWN at $1.2126 from $1.2142

Euro/pound: DOWN at 86.93 pence from 87.08 pence

Brent North Sea crude: UP 1.9 percent at $86.66 per barrel

West Texas Intermediate: UP 2.1 percent at $82.72 per barrel

A.Clark--SFF