LONDON: Strong US growth figures brought a reprieve to the markets yesterday after a further stimulus cut by the Federal Reserve rattled emerging market currencies despite rate rises by India, South Africa and Turkey.
Asian shares fell heavily after the US central bank further reduced its quantitative easing stimulus overnight, following losses on Wall Street on Wednesday.
European stocks also initially retreated on the Fed’s announcement it would reduce its bond-buying programme by $10bn to $65bn per month. But data released yesterday showing the US economy grew at a stronger-than-expected annual rate of 3.2 percent in the fourth quarter, shifted markets into forward gear.
Frankfurt’s DAX 30 added 0.39 percent to 9,373.48 points and the CAC 40 in Paris rose 0.55 percent to 4,180.02 points, although London’s benchmark FTSE 100 index ended 0.09 percent lower at 6,538.45 points.
US stocks advanced, with the Dow Jones Industrial Average gaining 0.86 percent to 15,874.56 points in midday trade. The broad-based S&P 500 advanced 1.29 percent to 1,797.10, while the tech-rich Nasdaq jumped 1.85 percent to 4,126.46 points as shares in Facebook soared 16 percent higher after earnings rose eight-fold due to a big jump in advertising revenue. The euro was down to $1.3549 from $1.366.
Battered emerging market currencies also saw some relief. The Turkish lira perked up to 2.2474. South Africa’s rand currency edged up to 11.1798 against the dollar. Meanwhile the ruble also picked up from a new low against the dollar and euro due to mounting speculation that Russia’s central bank may delay a planned 2015 free-float of the currency because of its rapid decline.
And in India, the government vowed that it would take whatever steps necessary to ensure stability in its financial markets. India has lifted rates a modest quarter-point to slow inflation, but the move has had only a brief impact on the rupee, which closed near a two-month low hit on Monday.
And Argentina said its official foreign reserves fell by $2.1bn to $28.5bn in January as the central bank struggled against strong downward pressure on the peso, which has lost 18 percent of its value against the US dollar this month. AFP
