There was a sea of green on international markets overnight after the Fed shocked investors by making no change to its stimulus program. Markets had seemingly priced in the Fed making a small adjustment to its $85 billion a month worth of bond purchases.
However Ben Bernanke left the bond buying program in place, citing the slow economic recovery, tighter financial conditions and a high unemployment rate as reasons behind the decision not to taper.
Earlier in the session stocks had come under pressure following weaker-than-expected housing data for August.
However sentiment changed dramatically after the Fed’s decision, with investors sending Wall Street into a buying frenzy in the final hours of trading.
The Dow jumped 147 points (+1%) to 15677, the S&P500 climbed 21 points (+1.3%) to 1726 and the Nasdaq rose 38 points (+1%) to 3784.
European markets briefly took part in the Bernanke bounce, although gains there were relatively muted. The UK FTSE slipped 0.2%, the German DAX put on 0.5% and the French CAC added 0.6%.
There were gigantic moves in commodity markets, with gold leaping 4.5% to US$1367 an ounce as the Fed’s easy money policy looks set to roll on for at least another few months.
Oil rebounded 2.5% to US$108.07 a barrel on the back of the Fed decision and after data showed a larger-than-expected drop in weekly crude stockpiles.
The greenback was sold off across the board as the prospect for tighter monetary policy in the US was seemingly delayed by Bernanke’s dovish comments.
The Aussie was one of the biggest movers against the greenback, soaring 1.8% to 95.20 US cents – its highest level since mid-June. There is no major economic data due for release today.