The US Federal Reserve’s third round of monetary stimulus led to a rise in shares prices on both sides of the Atlantic along with oil prices while gold hit a six-month high and the dollar fell in value against other currencies.
The launch of the Fed programme, together with hopes of progress on tackling the eurozone debt crisis pushed European shares their best levels in 14 months on Friday
The biggest gainers were companies with profits most linked to economic growth.
Basic resources stocks soared on the prospect of growing demand for metals. Kazakh-focused copper miner Kazakhmys was a standout with its shares jumping 13 percent by mid afternoon.
Some analysts warned the euphoria may not last as economic momentum remained weak and developments in crisis-mired Spain and Greece will likely depress investors sentiment again in coming months.
Oil also benefited from the Fed’s bond buying plans. Brent crude was up for the seventh straight session on Friday, heading towards $118 a barrel on hopes for stronger global demand.
Crude prices were additionally also boosted by supply concerns on escalating anti-US protests in the Middle East and North Africa.
The US central bank announced it will buy 40 billion dollars of mortgage debt each month, while policymakers also pledged to keep interest rates ultra-low until at least the middle of 2015.
“The USA has enjoyed broad price stability since the mid 1990’s and continues to do so today. The employment situation however remains a grave concern. While the economy appears to be at a path of moderate recovery it isn’t growing fast enough to make significant progress reducing the unemployment rate,” explained Fed chairman, Ben Bernanke
High unemployment is depressing consumer spending keeping inflation low which gives the Fed leeway to launch this round of a programme that is essentially printing money.
It is not without criticism with analysts concerned it could fuel inflation in the long term. Politicians in other countries have complained the programme cheapens the dollar and hurts their exports.
On the domestic front one Republican senator said the move looks to be “political”. The Fed chairman was an economic adviser to former President George W Bush, a Republican. The Romney campaign said “We should be creating wealth, not printing dollars.”