World markets surge in wake of Fed’s infusion of cash

November 5, 2010

By Patrice Hill, The Washington Times

Stocks soared from New York to Tokyo on Thursday on investor elation over the Federal Reserve’s massive cash infusion for the economy and markets, sending U.S. stock indexes to their highest levels since the 2008 financial crisis.

After pausing on Wednesday afternoon immediately after the Fed’s announcement, investors shook off any qualms over the unusual and controversial move by the central bank and waxed optimistic on the brighter outlook for the world economy.

The Dow Jones industrial average surged 220 points, or 2 percent, to 11,435, its highest point for the year, while the Standard & Poor’s 500 index of blue-chip stocks rallied by nearly 2 percent to break through technical barriers and end at 1,221.

The euphoria on Wall Street followed similar dramatic gains in Asian and European indexes overnight as global investors saw the Fed’s move as a boon for business and markets worldwide.

After announcing that it would buy $900 billion in U.S. Treasury bonds in the next six months, Fed Chairman Ben S. Bernanke said in an opinion article that the move was aimed in part at spurring a stock rally so as to increase the wealth of businesses and stock owners.

The stock gains, the Fed chairman reasoned, would spur confidence among businesses and consumers, helping to generate economic activity and growth.

“Go for growth” is the message, said John Silvia, chief economist at Wells Fargo Securities, and that means investing in stocks and commodities like oil, gold, copper and nickel that rise with growth and inflation.

Stock and commodity investors clearly got the message Thursday. Stock indexes in London, Paris, Frankfurt, Tokyo and Shanghai gained around 2 percent, while oil prices jumped 2 percent to $86.49 a barrel. Gold surged by $45.40, or 3.4 percent, to a record $1,383.10 an ounce.

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