World stock markets were mostly higher yesterday on guarded optimism that the US Federal Reserve’s bold US$1.2 trillion spending plan would bring a quicker end to the worst global slowdown in decades.
By noon in Europe, Britain’s FTSE 100 was up 1.5 percent to 3,862.11, Germany’s DAX advanced 1.6 percent to 4,061.83 and France’s CAC 40 rose 1.1 percent to 2,789.48.
Their rise followed overnight gains on Wall Street after the Fed said it would pump more than US$1 trillion into the economy.
The Fed plans to buy up to US$300 billion in long-term government bonds and some US$750 billion in mortgage-backed securities, which would help revive the country’s sagging housing market.
The measures — aimed at propping up demand and spending in the US by driving down borrowing costs for consumers and companies alike — stunned investors around the world. The Fed hasn’t set out to influence long-term interest rates by buying long-term bonds since the 1960s.
“The markets are responding favorably to signs the central banks are taking more aggressive action to boost the supply of money available for borrowing in the economy,” said Andrew Bell, head of research at Rensburg Sheppards, an investment management company in Britain. “I don’t think people are euphoric, I think people realize the economy’s got pressure. But sentiment a couple of weeks ago was so steeped in gloom that the small piece of good news has begun turning things around.”
Meanwhile, new jobless claims in the US fell more than expected last week, but continuing claims set a new record for the eighth straight week.
The US Labor Department said yesterday that initial requests for unemployment insurance dropped to a seasonally adjusted 646,000 from the previous week’s revised figure of 658,000. That was better than analysts’ expectations.
But continuing claims jumped 185,000 to a seasonally adjusted 5.47 million, another record high and more than the roughly 5.33 million that economists expected.
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