Stock markets in Asia and Europe surged Friday as investors cheered the U.S. central bank's aggressive actions to boost the sluggish American economy.
The Hong Kong index advanced nearly 3 percent and the Tokyo market almost 2 percent. Stock indexes in London, Frankfurt and Paris jumped higher, while key exchanges in the U.S. continued their gains in early trading Friday after a big surge late Thursday.
One stock analyst in Hong Kong, Francis Lun of Lyncean Holdings, said investors had expected the U.S. Federal Reserve to act, but nonetheless welcomed the central bank's latest attempt to spur hiring in the slack American labor market and to keep interest rates low for the next several years.
“Of course, the market has been expecting the news, and welcomed the news, and we see today that equity markets in Asia, all around, rise strongly, and the Hang Seng Index up almost 500 points. So it is a good measure, a market-boosting measure, and I think that the Hong Kong market will rise a little bit more.”
Some U.S. analysts remained skeptical that the Fed's action to buy $40 billion a month of securities supported by real estate loans to put more money into the world's largest economy would make much difference in the U.S. economy. The central bank has already bought more than $2 trillion worth of securities since the world recession hit in 2008, but U.S. job growth remains weak and the jobless rate has been above an unusually high 8 percent level for 43 straight months.
Some critics also say the central bank action could eventually lead to increased prices for U.S. consumer goods, even as the Fed, for now, is clearly intent on boosting hiring in the labor market and has concluded that inflation is under control.
The U.S. government reported Friday that more expensive gasoline pushed consumer prices ahead in August by the most in three years — six-tenths of a percent. But it said that overall inflation remains tame, up only 1.7 percent over the last year.
In addition to buying securities, the Federal Reserve said it would extend the timetable to keep its key lending rate near zero percent from late 2014 at least through mid-2015. The central bank said it expects that eased financing “will remain appropriate for a considerable time,” even after the U.S. economy strengthens from its current sluggish pace.
The central bank maintains political neutrality in the United States. But its latest stimulus lands in the final stages of the country's presidential election campaign, where the state of the economy is the key issue.
Republican challenger Mitt Romney says the incumbent Democrat, President Barack Obama, has failed in his oversight of the American economy and that he would not reappoint Fed chairman Ben Bernanke when his term ends in early 2014. Mr. Obama has pointed to 30 months of job growth in the U.S. and says Mr. Romney would return to policies that led to the worst U.S. economic downturn since the Great Depression of the 1930's.
