US Fed's shock announcement rallies global stock markets
Asia and emerging markets get a big boost as Fed reveals it is not ending quantitative easing yet
THE US Federal Reserve shocked the world by announcing it would not scale back its stimulus programme until the economy improves further.
Reacting to the announcement, global stocks soared, particularly in Asia. Japan's Nikkei 225 index rose 1.3 per cent, Hong Kong's Hang Seng jumped 2 per cent and Australia's ASX 200 rose to a five-year high.
Analysts had expected the Fed to begin the process of 'tapering' its quantitative easing policy. In June, Ben Bernanke had announced that the central bank's $85bn a month bond-buying programme would be cut back over the next year and sent stocks, bonds and gold into a nosedive.
The prospect of the end of the stimulus put a huge strain on emerging markets, which have come to rely on the constant supply of cheap cash flowing in from the US.
According to the Financial Times, following the Fed's revelation Indonesian stocks soared 7 per cent in the first half-hour of Jakarta trading and are now up 4.7 per cent. The Philippines stock market is up 3.3 per cent and the Thailand bourse added 3.2 per cent. In India, the benchmark Sensex is rising 3 per cent.
HSBC economist Frederic Neumann said "Markets are thrilled, and much-needed reprieve for battered EM (emerging markets) investors is on its way."
Bernanke has now backed away from his June guidance and said the Fed would await "more evidence that progress will be sustained before adjusting the pace of its purchases".
European stocks also got a boost in the wake of the news. The FTSE 100 opened 1.2 per cent higher, as did Germany's DAX. France's CAC 40 opened 1.3 per cent up, the highest ever opening for the index since September 2008.
The FTSE All-World index is up 1.3 per cent to its best level since May 2008. ·