Markets buoyant after Fed assessment
Wednesday, 14 March 2012 | 12:42
Markets were buoyant Wednesday, a day after a fairly rosy assessment of the U.S. economy from the Federal Reserve boosted confidence about the state of the world's largest economy.
A seeming calm in Europe's debt crisis following Greece's successful bond swap has also fueled the optimism, that's sent many stock indexes around the world up to multi-month highs. U.S. markets are doing even better, trading at levels not seen since the collapse of U.S. investment bank Lehman Brothers in 2008.
The latest bout of optimism was fueled by a more positive tone from the Fed after it kept monetary policy unchanged. It also pledged to keep its key interest rate at super-low levels until late 2014.
News that all but four of 19 major U.S. banks passed a Federal Reserve "stress test" exercise and got the green light to boost dividends and take other steps that will make their stocks more attractive to investors also helped support markets.
"Sentiment remains positive aided by a neutral Fed statement, better U.S. economic data, and U.S. banks passing the Fed's stress test," said Neil MacKinnon, global macro strategist at VTB Capital.
"Worries about the Greek debt crisis have diminished in the light of the recent restructuring and investors seem sanguine about potential knock-on effects elsewhere in the eurozone," he added.
The combination of an improving U.S. economic backdrop and a more benign European debt backdrop has helped stocks rally hard Wednesday, a day after the Dow Jones industrial average closed above 13,000 and the broader S&P 500 index breached 1,380, widely considered a key technical level in the markets.
In Europe, the FTSE 100 index of leading British shares was up 0.4 percent at 5,981 while Germany's DAX rose 1.1 percent to 7,071. The CAC-40 in France rose 0.7 percent to 3,576.
Wall Street was poised for a steady open, with both Dow futures and the S&P 500 futures up 0.1 percent.
The recent positive U.S. economic news has also benefited the dollar as investors have reined in predictions of another monetary stimulus from the Fed. The euro was trading 0.1 percent lower at $1.3068 while the dollar was 0.5 percent higher at 83.37 yen.
Earlier in Asia, stocks outside of China were mostly higher. Japan's Nikkei 225 index jumped 1.5 percent to 10,050.52 as the yen continued its retreat from record highs against the dollar. The last time the Nikkei closed above 10,000 was July 27.
But Hong Kong and mainland Chinese shares lost ground, with property developers among the biggest decliners, after Premier Wen Jiabao said government curbs that have started to cool surging housing prices will remain in place.
Hong Kong's Hang Seng Index slipped 0.2 percent to 21,307.89. The benchmark Shanghai Composite Index tumbled 2.6 percent to 2,391.23. The Shenzhen Composite Index plunged 4.1 percent to 969.12.
Source: The Associated Press
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