European Markets Hit Highs on US Fed Reserve Stimulus Shocker

European markets logged sharp gains in opening trade, on 19 September, as the US Federal Reserve's decision to maintain the current pace of its $85bn bond-buying stimulus boosted investor sentiment.

Europe's FTSEurofirst 300 opened 0.8% higher in early trade.

Britain's FTSE 100 opened 1.2% higher.

Germany's DAX opened 1.2% higher, a new record for the index.

France's CAC 40 opened 1.3% up, the highest ever opening for the index since September 2008.

Spain's IBEX opened 1.4% higher.

Italy's FTSE MIB opened 1.6% higher.

The US Federal Reserve shocked the world after it announced that it would stay the course and not start paring back its monthly asset-buying stimulus.

On 18 September, the world's most powerful central bank defied market consensus and decided against reducing its massive monthly asset buys as the current pace of economic growth in the US did not justify tapering monetary stimulus.

In addition, Fed Chairman Ben Bernanke refused to clarify whether the Fed would taper its bond purchases at all this year. Instead, he asserted that the programme was "not on a preset course."

"Bulls are rejoicing after the Fed and Ben Bernanke decided to maintain monthly bond and mortgage backed security purchases at $85 billion per month. While Bernanke's dovish comments and lowered guidance on economic growth clearly highlighted the deteriorating health of the US economy, stock investors jumped up and down for joy. Continuation of QE is extremely bullish for equities leading into the back end of 2013," says Tim Radford, global analyst at Rivkin Securities.

"This part of the cycle is where scepticism starts to dissipate and euphoria ensues. With U.S. stocks unexpectedly breaking to new all-time highs overnight, left over cash sitting on the sidelines will now likely be forced to chase gains in equities. Ultimately however, this will have to end, and will end badly when the Federal Reserve decides to start not only reducing stimulus, but turning off the tap completely. But for now bulls are content with the Federal Reserve's decision, which could easily see the S&P 500 Index surge toward 1,800 by year end," Radford adds.

In Asia and the US

In Asia, Japan's Nikkei finished 1.80% higher on 19 September while Australia's S&P/ASX closed 1.10% higher. Financial markets in mainland China and South Korea remained closed for public holidays.

Earlier in Asia, markets rallied after the Fed shocker. India's BSE Sensex shot up by about 3% to its highest intraday peak in almost three years.

On Wall Street, indices ended higher on 18 September following the Fed decision, with the Dow and the S&P indices logging record gains at the end of day's trade.

The Dow finished 147.21 points or 0.95% higher a 15,676.94, boosted by Alcoa and Home Depot.

The S&P 500 closed 20.76 points or 1.22% higher at 1,725.52.

The Nasdaq ended 37.94 points or 1.01% higher at 3,783.64.