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Fed Surprise Sparks Markets Surge

posted 19 Sept 2013, 06:03 by Mpelembe   [ updated 19 Sept 2013, 06:03 ]


Reuters Business  Report - Bad news for the U.S. economy, but good news for markets worldwide.

The Federal Reserve's decision to keep pumping $85 billion into the economy sent European shares to multi-year highs.

Markets - it seems - are addicted to the stimulus.

But they're not telling the full story, says IG Index's Brenda Kelly.


"You can't look at the stock market as a reflection of the economy, I think that is a bit of a cliche for a reason, but certainly unemployment is a problem and I think the Fed is needing to address that."

Germany's DAX hit a new all time high, while France's CAC and the European FTSE 300 had their best day for five years.

Many investors had been banking on the Fed scaling back - emerging markets in particular have taken a hit in recent weeks over the prospect.

The surprise move suggests the Fed may want to minimise speculation.

Robert Cole is from Reuters BreakingViews.


"By accident or design what the Federal Reserve may be trying to do here is sort of playing this hokey kokey game. We're going to taper, we're not going to taper, so that by the time action is actually taken, which is in six months or 12 months' time, the markets have got bored of this story and don't shift asset prices in a way it can knock this thing off course."

The U.S. dollar also fell to a 7 month low, while the euro hit a 7 and a half month high.

Some believe it may go as high as $1.37.

That could hurt exports and damage Europe's fragile recovery.