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US Fed boosts stock markets

September 19, 2013

European stock markets have surged strongly after the US Federal Reserve surprised investors on Wednesday by leaving its monetary stimulus program unchanged. Germany's blue-chip DAX index hit a new all-time high.

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Image: Reuters

At the Frankfurt Stock Exchange, Germany's DAX index easily left its last week record behind, climbing more than 1 percent to 8735 points in morning trading.

Other European stock markets also rose to multi-year highs, boosting the pan-European blue-chip Euro Stoxx 50 index to its highest level since May 2011.

"It's a perfectly reasonable reaction. The market got it wrong, it misread the signals from the US Fed," Michael Hewson, analyst with CNC Markets, told Reuters news agency.

After European stock markets had closed on Wednesday, the United States' central bank (US Fed) announced it would leave its monetary stimulus program unchanged.

Fed leaves US stimulus program intact

Surprise move by Fed

Under the program, the US Fed pumps $85 billion (63 billion euros) into financial markets each month by purchasing bonds worth that amount. The measure, which is also known as quantitative easing, is intended to boost the US economy and lower unemployment.

Stock markets, however, had expected the US Fed to reduce, or taper, the program by about $10 billion, following a two-day central bank meeting.

The stock market rally in Europe followed similar gains at Asian equities markets. However, some analysts raised doubts about the sustainability of the rally.

"After this initial couple of days of very positive sentiment people will start to realize that the tapering hasn't gone, it's just been delayed," BNP Paribas analyst Philippe Gijsels told Reuters.

The correction and with it increased nervousness was eventually going to come, he added.

uhe/slk (Reuters, AFP, dpa)