The DAX index board during a trading session on the Frankfurt Stock Exchange yesterday. The DAX 30 closed the day up 2.57% at 10,738 points.
AFP
London
European stock markets rallied yesterday following strong gains in Asia after the US Federal Reserve ended months of uncertainty by raising interest rates for the first time in nearly a decade.
Frankfurt’s main index DAX 30 led the way in Europe, closing up 2.57% at 10,738 points. Paris CAC 40 ended the day 1.14% higher at 4,677 points while FTSE 100 closed up 0.68% at 6,102 points.
“With the uncertainty surrounding the Fed now cleared and panic not ensuing, everything is now in place for a strong end to the year,” said Craig Erlam, senior market analyst at Oanda trading group.
Wednesday’s widely expected move by the US central bank signalled that the world’s number-one economy is in rude health.
The Fed raised its benchmark federal funds rate, locked near zero since the 2008 financial crisis, by a quarter point to 0.25-0.50%, saying the US economy is growing solidly and should accelerate next year to a respectable 2.4% pace.
In response, the dollar has clocked up advances against most other currencies. The euro dropped to $1.0811, from $1.0911 late in New York on Wednesday.
“Investors are no doubt relieved that the Fed has finally got around to raising interest rates, removing some policy uncertainty, while the normalisation of monetary policy also provides a much needed signal of confidence in the US economic recovery,” said Lee Hardman, currency analyst at Bank of Tokyo-Mitsubishi UFJ.
Fed chair Janet Yellen said the decision “recognises the considerable progress that has been made toward restoring jobs, raising incomes and easing the economic hardship of millions of Americans”.
The bank sees US growth picking up pace next year despite a slowdown in most other world economies, particularly China, and also stressed future rate hikes would be “gradual”, forecasting 100 basis points throughout 2016.
In Asia, Tokyo ended 1.6% higher, Shanghai put on 1.8% and Sydney climbed 1.5%.
The rally comes after a torrid month that saw equities battered — including nine straight losses in Hong Kong — by concerns about the global outlook and plunging oil prices that skittled energy firms.
“What is clear is that equity markets are taking the rate hike as a positive,” said IG Markets analyst Angus Nicholson.
But the positive outlook waned a bit yesterday on Wall Street which slipped into negative territory, threatening gains from the three-day rally seen before and immediately after the Fed’s historic move.
Near mid-day in New York, the Dow Jones Industrial Average was down 0.72% at 17,622.11 points.
The broad-based S&P 500 fell 1.11% and the tech-rich Nasdaq Composite Index lost 0.70%.
