Fed sees weak US economy and Greek debt default haunts markets
Source: Agencies |
January 27, 2012, Friday
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Print Edition
Print Edition
THE euro held firm against the US dollar while European shares and gold moved higher yesterday, after the US Federal Reserve set out an unambiguously easier policy stance, but fears of a messy Greek debt default still haunt the markets.
Fed Chairman Ben Bernanke said the US central bank might consider further monetary easing through bond purchases. It also pushed back the likely timing of an eventual interest rate hike to late 2014, and set a formal inflation target of 2 percent.
Riskier asset markets around the world gained immediately on the statement and the ultimate safe-haven, the US dollar, eased.
"We are definitely seeing risk-on at the moment, markets have got excited as economic growth helps bring down debt," said Louise Cooper, markets analyst at BGC Partners.
"But it tells us an awful lot about the state of the economy in the United States. If the Fed is telling us interest rates are going to stay low the recovery must be fragile," she added.
The MSCI world equity index rose 0.6 percent to 318.38, extending its strong start to the year with gains of 6 percent in 2012. The FTSEurofirst 300 index of leading European shares opened up 0.3 percent at 1,042.53 points. The index is up around 21 percent from its 2011 low it hit in September.
In Asia, Hong Kong's Hang Seng Index jumped 1.6 percent to 20,439.14 on its first trading day since the Chinese New Year holiday. Japan's Nikkei was 0.4 percent lower at 8,849.47 as a weakening dollar pressured the country's exporters.
The euro was near five-week highs at US$1.3110 though little changed on closing New York levels. While the dollar index eased to around of 79.40, near its five-week low.
Gold, which posted its biggest one-day gain in four months on Wednesday, was at its highest level in more than a month in choppy trade due to the Fed's pledge to keep rock-bottom rates for at least two more years.
In Europe Gold was steady at US$1,709.89 an ounce after earlier hitting a high of US$1,713.59, its highest since mid-December.
Greece remains in focus, as the top negotiator for private creditors was due to return to Athens later yesterday to resume talks with officials on a debt swap deal, as the clock ticks ahead of a March deadline when Greece faces major bond redemptions.
Fed Chairman Ben Bernanke said the US central bank might consider further monetary easing through bond purchases. It also pushed back the likely timing of an eventual interest rate hike to late 2014, and set a formal inflation target of 2 percent.
Riskier asset markets around the world gained immediately on the statement and the ultimate safe-haven, the US dollar, eased.
"We are definitely seeing risk-on at the moment, markets have got excited as economic growth helps bring down debt," said Louise Cooper, markets analyst at BGC Partners.
"But it tells us an awful lot about the state of the economy in the United States. If the Fed is telling us interest rates are going to stay low the recovery must be fragile," she added.
The MSCI world equity index rose 0.6 percent to 318.38, extending its strong start to the year with gains of 6 percent in 2012. The FTSEurofirst 300 index of leading European shares opened up 0.3 percent at 1,042.53 points. The index is up around 21 percent from its 2011 low it hit in September.
In Asia, Hong Kong's Hang Seng Index jumped 1.6 percent to 20,439.14 on its first trading day since the Chinese New Year holiday. Japan's Nikkei was 0.4 percent lower at 8,849.47 as a weakening dollar pressured the country's exporters.
The euro was near five-week highs at US$1.3110 though little changed on closing New York levels. While the dollar index eased to around of 79.40, near its five-week low.
Gold, which posted its biggest one-day gain in four months on Wednesday, was at its highest level in more than a month in choppy trade due to the Fed's pledge to keep rock-bottom rates for at least two more years.
In Europe Gold was steady at US$1,709.89 an ounce after earlier hitting a high of US$1,713.59, its highest since mid-December.
Greece remains in focus, as the top negotiator for private creditors was due to return to Athens later yesterday to resume talks with officials on a debt swap deal, as the clock ticks ahead of a March deadline when Greece faces major bond redemptions.
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