Markets around the globe rally on ECB debt strategy

Published:  7 Sep at 10 AM

An announcement by the European Central Bank that it intends to buy bonds in an attempt to ease the debt crisis gripping the eurozone has met with positive reactions from markets around the globe. The ECB hopes that bond buying will drive down the cost of borrowing for a number of the block’s struggling economies.

Earlier in 2012, the borrowing costs of countries such as Italy and Spain had hit levels which were believed to be unsustainable. Analysts feared that an inability to borrow and pay off debts would not only have spelt disaster for the eurozone but also big problems for the global economy.

The latest assurances from the ECB saw the Hang Seng in Hong Kong rise by 2.4 per cent, the Kospi in Korea gain 2.6 per cent and the Nikkei 225 index in Japan go up by 2.2 per cent.

IG Markets analyst, Justin Harper, said the markets had been looking to the ECB to commit to decisive action, and that they had been given it. The announcement resulted in the FTSE 100 in London rising 2.1 per cent, the Cac 40 in France gaining three per cent and the Dax index in Germany jumping 2.9 per cent.

The euro was also given a boost against the US dollar and the yen. Although strategists believe the ECB has provided relief for the markets, they have also warned that the debt crisis is far from over.