Last Thursday, in its latest bid to kick-start the US economy, the Federal Reserve went “open-ended”. America’s central bank is to launch a third round of “quantitative easing”, Fed Chairman Ben Bernanke announced, while extending the length of its pledge to keep interest rates at rock-bottom. On cue, global equities surged, as confidence grew that the world’s leading central banks have “finally taken decisive action” to buttress both the US and European economies.
Bernanke’s move, of course, followed news in early September that the European Central Bank is to engage in “unlimited” buying of the sovereign bonds of “peripheral” eurozone members. This encouraged the belief that monetary union is less likely to crumble, which cheered-up global equity markets just before last weekend. Many traders are celebrating this weekend too, following Bernanke’s words on Thursday, which caused the S&P500 to extend a rise that has now pushed the index to its highest level since 2007. European shares also reached highs not seen for over a year.