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European stocks gain after Fed signal on US stimulus

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(Globalpost/GlobalPost)

European stock markets rose on Thursday, mirroring gains across Asia, after the Federal Reserve indicated that it was in no rush to end its huge programme for stimulating the US economy.

London's FTSE 100 index of leading shares climbed 0.58 percent to stand at 6,542.46 points in midday deals.

Frankfurt's DAX 30 jumped 1.27 percent to 8,151.14 points and in Paris the CAC 40 grew 0.70 percent in value to 3,867.26.

Milan's MIB index gained 0.10 percent to 15,692.66 points.

"After June's sell off in risk assets was attributed to seemingly hawkish comments from the Fed chairman last month, the July rally has built further momentum ... on the back of a much softer statement from the Fed chairman after markets closed last night," said Matt Basi, head of UK sales trading at CMC Markets UK.

Federal Reserve boss Ben Bernanke said on Wednesday that the US central bank's stimulus drive would be kept in place "for the foreseeable future".

The news poured cold water on market expectations that the Fed would start to pull back on massive bond-buying later this year, which has sent global equity indices reeling in recent weeks.

Bernanke insisted that the Fed's easy-money policy was still necessary, because the unemployment rate at 7.6 percent was still too high and inflation was too low for comfort.

"Both the employment side and the inflation side are saying that we need to be more accommodating," he said, answering questions after a speech.

"Moreover, the other portion of macroeconomic policy, fiscal policy, is now actually quite restrictive... Put that all together, I think you can only conclude that highly accommodative monetary policy for the foreseeable future is what's needed in the US economy," he said.

He added that the full impact of deep government spending cuts put in place in March was yet to be seen.

The comments came hours after minutes from the bank's latest policy meeting suggested it would move more rapidly toward winding up the $85-billion-a-month stimulus.

Currency traders immediately sold the dollar, betting that interest rates would remain low for a long time to come.

In foreign exchange trading on Thursday, the euro rose to $1.3044 from $1.2988 late in New York on Wednesday. The dollar dropped to 99.43 yen from 99.72 yen.

The price of gold increased to $1,286.97 an ounce from $1,256 Wednesday on the London Bullion Market.

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http://www.globalpost.com/dispatch/news/afp/130711/european-stocks-gain-after-fed-signal-us-stimulus