Fed move boost for Asian markets

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.

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