Fri | Sep 22, 2017

Fed rate rise welcomed in world’s stock markets

Published:Friday | December 18, 2015 | 12:00 AM
Chair of the Federal Reserve Janet Yellen

Global stock markets surged on Thursday as the Federal Reserve's decision to raise interest rates for the first time in nearly a decade ended a period of uncertainty that had been roiling investors for the past few months. The Fed's signal that rate rises over the coming months will be gradual also helped soothe concerns.

Taking their cue from Asia earlier, European stock markets posted big gains. Germany's DAX advanced 3.2 per cent to 10,807 while the CAC-40 in France rose 2.3 per cent to 4,732.

The FTSE 100 index of leading British shares was 1.5 per cent higher at 6,149. US stocks were also poised for a solid open after advancing in the wake of the Fed's decision Wednesday - Dow futures and the broader S&P 500 futures were up 0.2 per cent.

The Fed raised its main interest rate by a quarter of a point, a move that was widely anticipated in the markets. That rate had been near zero for seven years to foster an economic recovery after the US mortgage crisis that sparked a global recession. The rate hike was a long-expected vote of confidence in the US economy. At the same time, investors were encouraged that Fed emphasized that further increases will be gradual.

"If Fed Chair Janet Yellen was ever to pull a rabbit out of the hat, now was the time to do it and she succeeded magnificently," said Michael Ingram, market strategist at BGC Partners. "Punch-drunk markets have applauded."

The dollar was a big gainer too as investors welcomed the higher returns they will get from holding onto the US currency. The euro was down a further 0.3 per cent at $1.0854 while the dollar rose 0.1 per cent to 122.47 yen.

Japan's Nikkei 225 jumped 1.6 per cent to 19,353.56 and Hong Kong's Hang Seng rose 0.8 per cent to 21,872.06. South Korea's Kospi added 0.4 per cent to 1,977.96. Australia's S&P/ASX 200 advanced 1.5 per cent to 5,102.00. China's Shanghai Composite gained 1.8 per cent to 3,580.00.

In the oil markets, the mood remained fragile. Benchmark US crude was down 13 cents at US$35.39 a barrel in electronic trading on the New York Mercantile Exchange. The futures contract dropped US$1.83, or 4.9 per cent, to close at US$35.52 in New York on Wednesday. Brent crude, a benchmark for international oils, was up 20 cents at $37.58 a barrel in London.

- AP