Stocks still buoyed by Fed's interest rate plan
AP and AFP
December 21, 2013, 12:07 am TWN
PARIS/HONG KONG--Investors continued Friday to breathe a sigh of relief that the U.S. central bank has committed to keeping interest rates low even though it has decided to start pulling back on its monetary stimulus.
Stocks in Europe pushed higher following a largely solid, if unspectacular, performance in Asia, where worries over China persisted. U.S. futures also pointed to modest gains at Wall Street's opening.
Friday's volumes are expected to be fairly low as many traders pack up for the Christmas and New Year break, especially now that the Fed has decided to reduce its stimulus by US$10 billion a month starting from January. Mindful of the impact on markets, the Fed emphasized Wednesday that its main interest rate would remain low until U.S. unemployment falls below 6.5 percent. It's now 7 percent.
Global investors broadly welcomed the Fed's decision Wednesday to reduce its bond-buying by a modest US$10 billion a month to US$75 billion while pledging to keep interest rates at record lows for the foreseeable future.
The move indicated the central bank is confident the world's number one economy is becoming strong enough to stand on its own feet as it recovers from the financial crisis.
While the cut will mean less cash sloshing around the financial system and therefore a likely withdrawal of funds from emerging economies, analysts said the fact it was so small provided investors with some comfort.
In Europe, the FTSE index of British shares rose 0.4 percent to 6,613. The French CAC-40 was up 0.3 percent to 4,189, while Germany's DAX climbed 0.6 percent to 9,387.
U.S. stocks appeared poised to open up. Dow futures were up 0.2 percent at 16,142, while S&P futures rose the same rate to 1,806.
In Asia, shares were mixed on Friday and the dollar touched a new five-year high against the yen after the Federal Reserve said it would start to wind down its stimulus programme next month.
Despite the weaker yen, Japan's Nikkei sank after jumping more than four percent to a six-year high over the previous three sessions.