European and Asian stock markets open with gains after US Fed statement
Wednesday, 10 August 2011 09:30
Both Asian and European stock markets opened higher this morning following the announcement towards the end of yesterday by the US Federal Reserve that it would keep interest rates in the Unites States close to zero until at least mid-2013.
The US stock market made considerable gains in the last few hours of trading yesterday after the announcement and the confidence appears to have extended to global markets in early trading today. Wall Street ended the day up by around four per cent, the best day the US stock market has seen in two years.
The FTSE 100 share index in London soon made gains of 1.4 per cent and Germany’s Dax index shot up by more than two per cent. However, markets still have some way to go before they reach the levels of before the sell-off began in earnest on July 29th.
Analysts still expect the markets to be volatile and suggest that this bounce could be short-lived, citing the Federal Reserve’s lack of economic stimulus in their announcement as one of the reasons, along with continued concerns about global economic growth.
In its announcement, the Federal Reserve warned that US economic growth had been slower than it had expected and the fundamental negative outlook for the US economy could be the main factor influencing the decisions of US investors in the coming weeks.
It seems that yesterday, investors focused on the interest rate announcement and this formed the basis for a bounce-back of stocks.
Some experts warned that the underlying weakness of the economy will lead to lower consumer demand that in turn will have a negative impact on the export-led economies of Asia.
The fall in global markets in the last two years has been caused by fears over the future of the US economy after ratings agency Standard & Poor’s decision to cut the US credit rating from triple-A to AA+ for the first time ever.
Additionally, the euro-debt crisis and the possibility that Spain and Italy could join Greece, Ireland and Portugal in requiring a bail-out from the eurozone has added to the lack of global market confidence.
Despite these concerns other stock markets around the world joined the FTSE and the Dax in reversing market sell-offs yesterday. The Australian ASX index ended the day up by 2.6 per cent and India’s Sensex made gains of 1.6 per cent.
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