Stock markets gave the Fed plan a big thumbs-up
London (AFP) - World stock markets rallied strongly Tuesday after the US Federal Reserve launched an unprecedented bond-buying plan, the latest salvo in a global counter-attack against fallout from the coronavirus outbreak.
European equities charged higher as investors shrugged off grim survey data showing collapsing eurozone and UK business activity in March, followed by Wall Street which also surged at the opening bell in New York.
The dollar beat a retreat from Monday’s three-year peak against the euro on the Fed news.
London stocks won more support after Britain became the latest western nation to implement a nationwide lockdown to help curb the spread of COVID-19.
“Stock markets in Europe are higher… as traders picked up the bullish baton from the indices in Asia,” said CMC Markets UK analyst David Madden, who also noted that traders had been expecting the “brutal” survey data.
“Political fighting in the US has prevented a stimulus scheme from being revealed earlier, but dealers are optimistic nonetheless,” he added.
US senators remain gridlocked, with Democrats on Monday again blocking a nearly $2 trillion rescue package for the economy.
While much of the planet goes into lockdown, traders gave a massive thumbs up to the US central bank’s pledge to essentially print money in a move not seen since the global financial crisis.
The Fed, which has already slashed interest rates to record lows, said it will buy unlimited amounts of Treasury debt and take steps to lend directly to small- and medium-sized firms hammered by restrictions across the country.
Earlier Tuesday, equities in Asia rallied with Tokyo ending more than seven percent higher.
The Nikkei was given extra lift by a Bank of Japan decision to embark on its own massive bond-buying scheme.
AxiCorp’s Stephen Innes called the Fed’s move “the most significant monetary experiment in the history of financial markets”.
“Asian investors like what they see from an all-in Fed, which is being viewed in a very impressive light for both Main and Wall Street, even as the US congress dithers.”
The weaker dollar also helped lift crude, which has been hammered to recent multi-year lows on the back of a price war between producers Saudi Arabia and Russia.
“Oil is only rallying because the Fed’s unprecedented measures finally stopped the stronger dollar,” said OANDA analyst Edward Moya.
“Crude prices will have wild swings, but no one is expecting the bottom to be already in place.”
- Key figures around 1330 GMT -
London - FTSE 100: UP 5.4 percent at 5,261.51 points
Frankfurt - DAX 30: UP 7.2 percent at 9,370.77
Paris - CAC 40: UP 5.0 percent at 4,108.07
Madrid - IBEX 35: UP 4.3 percent at 6,499.50
Milan - FTSE MIB: UP 5.7 percent at 16,449.14
EURO STOXX 50: UP 6.1 percent at 2,637.04
New York - Dow: UP 5.9 percent at 19,670.07
Tokyo - Nikkei 225: UP 7.1 percent at 18,092.35 (close)
Hong Kong - Hang Seng: UP 4.5 percent at 22,663.49 (close)
Shanghai - Composite: UP 2.3 percent at 2,722.44 (close)
Brent North Sea crude: UP 5.7 percent at $28.58 per barrel
West Texas Intermediate: UP 7.4 percent at $25.09
Euro/dollar: UP at $1.0850 from $1.0726 at 2100 GMT
Dollar/yen: DOWN at 110.66 yen from 111.23 yen
Pound/dollar: UP at $1.1781 from $1.1542
Euro/pound: DOWN at 92.10 pence from 92.93