Markets climb as world looks to Fed for QE exit strategy
The expectation is growing that Fed chairman Ben Bernanke and his colleagues may spell out exactly how and when the unprecedented stimulus which has kept markets afloat and sent bond prices soaring will be curtailed.
Policymakers are meeting this week, with Bernanke also expected to reassure investors the $85bn a month bond buying scheme can be stepped up again at any time, in an attempt to ease market concerns that the US is about to embark on a total withdrawal from QE.
The expectation of a clear QE road map helped boost markets overnight, with the S&P 500 and Dow Jones both finishing higher.
The S&P 500 closed up 0.8% at 1,639 points, while the Dow ended the session 0.7% firmer at 15,179 points.
Markets have seen an uptick in volatility in the last few weeks following the Fed chairman’s warning last month that it could start winding down the QE programme “in the next few meetings” if economic data continued to support the recovery.
The volatility has affected all markets, but UK shares also closed higher yesterday in anticipation of this week’s two-day meeting, with the FTSE 100 finishing 0.4% up at 6,330 yesterday.
The dollar also rose ahead of the two-day meeting, making gains against the pound, the euro and the yen.