Federal Reserve stimulus pledge boosts stocks

Published:  17 Sep at 10 AM

An announcement last week that the US Federal Reserve will be introducing measures to help boost the economy has helped to push the world’s stock markets to multi-month highs. The new securities buying programme has resulted in investors putting money into riskier stocks and assets.

The markets are also being supported by expectations that Europe’s banks will rally to help with the zone’s sovereign debt crisis. Ben Bernanke, head of the Federal Reserve said $40 billion per month would be pumped into the economy for as long as it takes for there to be a sustained improvement in the jobs market. US stocks closed on Friday at the highest level they have been at for half-a-decade.

A third programme of quantitative easing will see the Fed print money which will mean increased liquidity in the markets which usually results in commodities and stocks becoming more attractive. However, it also means that dollar will weaken against other currencies.

The euro has risen by 0.1 per cent to $1.3130. US crude is now worth over $99 per barrel and Brent crude is now worth $116.90 per barrel, a rise of 0.2 per cent and the highest level in more than four months.

Gold has also risen in value on the back of the Feds decision to print money. The precious metal hit a seven month high of $1,775 per ounce.