European shares open higher after Fed surprise

European stock markets opened higher today after the US Federal Reserve surprised investors by sticking to its programme of economic stimulus, sending regional indexes to multi-year highs.

Germany’s Dax hit a new record, France’s CAC and the pan-European FTSEurofirst 300 index hit five-year highs while the euro zone’s blue-chip Euro Stoxx 50 index rose to its highest since May 2011.

The Fed said yesterday it would keep buying $85 billion in bonds per month, defying expectations it would start to scale back that programme by at least $5-10 billion.

The US central bank said it wanted more evidence of solid economic growth before it started to scale back the programme, and the Fed also cut its growth forecasts.

The Fed’s decision to keep the programme - known as quantitative easing - unchanged drove USstock markets to record highs.

Terry Torrison, managing director of Monaco-based McLaren Securities, said that while he had some concerns that the Fed’s decision raised questions over the strength of the US economic recovery, he would follow the momentum of rising stock markets for now.

“We will continue higher but it seems to me that there’s a warning there from the Fed that they’re putting all this cash into the market but they’re not sure it’s fully working,” he said.

“However, you’ve got to stick with the momentum. For equities, the weight of money is still there waiting to come in.” (Reuters)