European markets rise on Fed’s dovish words
European markets are up this morning, following the lead set by Asia overnight on yesterday’s news the Federal Reserve plans to keep interest rates near zero until 2013.
The central bank’s Federal Open Market Committee said: “To promote the ongoing economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the committee decided today to keep the target range for the federal funds rate at zero to 0.25% percent.”
Germany’s Dax rose 2.2% while France’s Cac 40 benchmark was up 1.26% at CET 0940, following closes 1.05% and 2.8% higher for Japan’s Nikkei 225 and Hong Kong’s Hang Seng indices overnight.
They were reacting to the comment by the Fed that US growth was significantly weaker than expected, necessitating an loose stance on interest rates, through to 2013.
As a result of this, US markets recorded their biggest one-day gain in nearly two years.
The S&P 500 leaped 4.74% while the Dow Jones Industrial Average ended 3.98% higher. Each index is significantly lower this year.
Oil breached $80 a barrel again, while base metals also climbed.
The US dollar fell against the Swiss franc as the Fed also hinted it could instigate another round of money printing, in noting it was “prepared to employ [the range of policy tools available] as appropriate”.
Gold also rose on this news.
In the UK this morning the FTSE 100 also jumped by 1.41% in early trading by 0845 GMT, again higher than the 5,000 point barrier it breached downwards yesterday.