Fed move boost for Asian markets

<p>Asian markets rose today after the Fed cut its quantitative easing programme.</p>

The US Federal Reserve cut its quantitative easing scheme last night (December 19th), leading to Asian stock markets rising in the wake of the news.

Indexes such as the Nikkei in Japan and Australia's ASX 200 were up following the announcement, with the Nikkei rising by 1.7 per cent and the ASX 200 up two per cent.

The Fed stated that it would keep interest rates low for the time being, but announced its $85 billion (£51.8 billion) a month bond-buying programme was to be reduced by $10 billion a month.

Speculation had been growing that a raft of positive data from the US would lead to the Fed taking action, but analysts could not agree on the impact this would have on global markets.

Scott Clemons, chief investment strategist for Brown Brothers Harriman Wealth Management, told BBC News that the Fed's decision proves that the central bank remains in no rush to remove the stimulus package.

"The Fed is using a very careful language that they are going to continue to support the economy. That's part of the reason why the stock market is rallying," he said.

Markets and currency boosted

Erik Davidson, deputy chief investment officer at Wells Fargo Private Bank, added: "It is fodder for possibly better markets because it affirms the economy is healing."

Nick Verdi, an analyst with Barclays Capital, stated that the cut makes "the US dollar a more attractive investment option", so currencies could also rise on the back of the news.

He said: "Even though the Fed has committed to keeping interest rates low for now, at some point they will have to start to rise and investors are betting on that."

While the Nikkei was up by 1.7 per cent and the ASX 200 rose two per cent, South Korea and Indonesia's main stock markets were up as well. Furthermore, both the Nasdaq and S&P 500 indexes were over one per cent higher as well, while the Dow Jones ended 292.71 points higher, or a rise of 1.84 per cent.

Learn about the Asian markets and CFD trading at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.