Taperless Fed sets off share and bond market surge

Thu Sep 19, 2013 9:05am EDT
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By Marc Jones

LONDON (Reuters) - World shares and global bond prices surged on Thursday and the dollar fell after the U.S. Federal Reserve stunned markets by delaying plans to cut back its huge asset-purchase programme.

From London to Tokyo, Istanbul to Jakarta investors celebrated the prospect of continued stimulus in the world's largest economy, even though the reasons behind it were concerns about the strength of U.S. recovery.

The Fed also cut its projection for 2013 economic growth to a 2.0 percent to 2.3 percent range from a June estimate of 2.3 percent to 2.6 percent. The downgrade for 2014 was even sharper.

The prospect of the U.S. central bank continuing to shower the global financial system with ultra-cheap cash was more than enough to overcome any concerns however.

U.S. stocks were expected to open around 0.3 percent higher after hitting all-time highs on Wednesday. .N

MSCI's world share index .MIWD00000PUS, which tracks 45 countries, jumped 1.2 percent to a fresh five-year high as large gains in Asian markets were matched by a 1 percent jump by Europe's shares. .FTEU3

The chance that U.S. interest rates could stay low for longer was further enhanced by news from the White House that noted dove Janet Yellen was the front-runner to take over the Fed when Ben Bernanke steps down in January.

"The bottom line is that the (Fed) meant to send an extremely dovish message, not only through the lack of tapering, but also with its 2016 forecasts," analysts at Barclays wrote.   Continued...

A man walks through the lobby of the London Stock Exchange August 5, 2011. REUTERS/Suzanne Plunkett