The Federal Reserve's aggressive new plan to spark the U.S. economy boosted risk assets on Friday, sending global stocks to a 13-month high and driving the dollar to a more than four-month low against the euro.
Brent crude oil rose to a four-month peak, the S&P 500 neared a five-year high and European shares rose to their highest levels in 14 months.
The Fed on Thursday said it would pump $40 billion into the economy each month until the jobs market shows sustained improvement. The aggressive action enhanced what was an already upbeat mood in financial markets since the European Central Bank announced plans to cut the borrowing costs of struggling euro zone members.
"Markets had expected more quantitative easing, but they hadn't expected Bernanke and the Fed to be as aggressive as they were," said Jeffrey Given, senior managing director and senior portfolio manager at John Hancock Asset Management in Boston.
Fed Chairman Ben Bernanke on Thursday cited the dire state of the U.S. labor market, saying it remains a "grave concern."
"The Fed made it sound as if even after the economy recovers, interest rates will remain low. More people are moving into risky assets because Ben is not going to pull the punch bowl away," Given said.
On Wall Street, stocks finished higher, with cyclicals and financials leading the way. An index of U.S. housing shares, aided by the Fed's plan to buy mortgage-backed securities, rose 2.7 percent.
The Dow Jones industrial average .DJI rose 53.51 points, or 0.40 percent, to end at 13,593.37. The Standard & Poor's 500 Index .SPX climbed 5.78 points, or 0.40 percent, to 1,465.77. The Nasdaq Composite Index .IXIC jumped 28.12 points, or 0.89 percent, to 3,183.95.
Read more: http://www.reuters.com/article/2012/09/14/us-markets-global-idUSBRE88901C20120914
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