Global shares surge after the Fed's upbeat assessment of the US economy; gold gains from inflation outlook

Global shares surge after the Fed's upbeat assessment of the US economy; gold gains from inflation outlook
Traders are reflected in a screen at the Tokyo Stock Exchange.Hiroshi Watanabe/Getty Images
  • Global shares and risk assets rose on Thursday after the Federal Reserve's more hawkish stance on policy.
  • The Fed said vaccines and easing supply problems will help the economy strengthen and temper inflation.
  • Gold gained in line with the weakness in the dollar, rising above $1.786 an ounce.

Global shares rallied on Thursday, following the Federal Reserve's decision to wrap up economic stimulus more quickly as growth picks up, pushing the S&P 500 back towards record highs.

Futures on the Dow Jones rose 0.48% while those on the S&P 500 climbed 0.56% and Nasdaq 100 futures jumped 0.64% as of 05:30 a.m ET, indicating a strong start to trading later on.

The Fed said on Wednesday that most Covid-hit sectors had recovered, unemployment had fallen significantly and that the steps it was taking would ensure economic growth was sustained.

"Progress on vaccinations and an easing of supply constraints are expected to support continued gains in economic activity and employment as well as a reduction in inflation. Risks to the economic outlook remain, including from new variants of the virus," The Fed said in a statement on Wednesday.

The Federal Open Market Committee favored raising interest rates in 2022 at a faster pace than was initially expected to prevent inflation increasing further, though it said it expects it to remain above 2% "for some time". The central bank also said it would double the rate of tapering to $30 billion a month and suggested it could raise interest rates three times next year.


"In our view, the Fed so far has masterfully navigated the adjustment in market expectations for the path of policy without materially tightening financial conditions," Allison Boxer and Tiffany Wilding, economists at fixed-income fund manager PIMCO said.

Global markets responded positively to the Fed's decision that suggested economies could recover from the pandemic after all despite the rising threat from the Omicron variant.

In Asia stocks rose, with the Shanghai Composite up 0.75% and Hong Kong's Hang Seng up 0.23%, while Tokyo's Nikkei 225 gained 2.13%.

Investors in Europe reacted positively to the Fed's decision. London's FTSE 100 was up 0.98%, as Frankfurt's DAX rallied 1.5% and the pan-European Stoxx 600 index climbed 1.17%.

"With the Fed meeting now in the rear-view mirror, all attention now turns to today's Bank of England and Europeans Central Bank decisions, where the inflation problem is just as real, especially for the Bank of England after yesterday's big jump in headline consumer price index in November," Michael Hewson, chief market analyst at CMC Markets said.


There is a lot more uncertainty over what path the Bank of England's policymakers might follow. They held off from raising UK rates last month, even as inflation picked up. And now, they must juggle the opposing forces of a tight labor market and rising inflation with the spread of the Omicron variant, which has already prompted the government to introduce rules on mask-wearing.

Elsewhere, the dollar index fell 0.31% to $96.20. Gold gained in line with the weakness in the US currency, rising above $1.786 an ounce.

Brent crude rose 0.36% to $74.69 a barrel, while WTI crude was up 0.31% at $71.68 a barrel.

Cryptocurrencies rallied along with other risk assets. Bitcoin climbed 2%, ether 4.9%, solana's sol 10.2% and cardano's ada 4.9%.

The yield on the 10-year US Treasury note was down around 3 basis points to 1.436%.