* Cyclical shares gain; global shares near 13-month highs
* Dollar hits 4-month low against euro on Fed action, ECB
* Treasury yields rise as safe-haven bid ebbs, Fed buys MBS
* Italian 10-year yields fall below 5 percent
* Gold reaches 6-1/2-month high after Fed; oil extends gains
By Ellen Freilich
NEW YORK, Sept 14 The Federal Reserve's
aggressive new plan to spark the U.S. economy boosted risk
assets on Fr iday, sending global stocks to a 13-month high and
driving the dollar to a more than four-month low against the
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
"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
The Dow Jones industrial average rose 53.51 points,
or 0.40 percent, to end at 13,593.37. The Standard & Poor's 500
Index climbed 5.78 points, or 0.40 percent, to 1,465.77.
The Nasdaq Composite Index jumped 28.12 points, or 0.89
percent, to 3,183.95.
Brian Jacobsen, chief portfolio strategist at Wells Fargo
Funds Management, LLC in Menomonee Falls, Wisconsin, said the
Fed's balance sheet could expand by 11 to 12 percent by the end
of the year, monetary accommodation that could "translate into a
move up in the S&P 500 stock index to the 1,505 area."
In bond markets, yields on 10-year Italian government bonds
fell below 5 percent for the first time since late March as the
Fed's announcement added momentum to a rally dating from late
In contrast, the benchmark 10-year U.S. Treasury note price
fell 1-9/32, its yield rising to 1.87 percent from
1.73 percent late on Th ursday as investors exited safe-haven
debt in search of higher returns in riskier assets.
"A lot of good news out of Europe had already caused risk
markets to rally going into the Fed meeting so the Fed's
open-ended plan to buy mortgage-backed securities, its intent to
keep rates low until mid-2015, and its strategy to keep monetary
policy highly stimulative - even if the economy accelerated -
was a pretty potent combination and threw fuel on the rally,"
said Robert Tipp, chief investment strategist for Prudential
Fixed Income, with $330 billion in assets under management.
Euro zone finance ministers met in Cyprus on Friday, hoping
to build on progress the bloc has made this month following
plans announced by ECB President Mario Draghi and a German
court's green light this week for the euro zone's ESM bailout
European equities surged, with the pan-European FTSEurofirst
300 index rising 1.25 percent to 1,120.15. The MSCI
index of global stocks jumped 1.6 percent to
340.03, near its highest level since August last year.
The dollar index fell 0.5 percent to near four-month
lows at 78.903.
The dollar's broad decline left the euro at a
four-month high above $1.31, the latest in a string of technical
and psychological levels it has cut through this week.
"With Europe getting their act together (at least
temporarily), the Fed flooding the market with cash, and China
talking (about) stimulatory infrastructure projects, the three
largest influences of market dynamics could be creating a bull
market for at least the near term," said Neal Gilbert, currency
strategist at GFT Forex.
Brent crude oil rose 79 cents to $116.67 a barrel by
1735 GMT after reaching a four-month peak of $117.95. The global
North Sea benchmark was on track to end the week up more than 2
U.S. crude rose 68 cents to $98.99 a barrel after
hitting a four-month high of $100.42. It was on track to close
the week up 3 percent.
Base metals also rallied. Aluminum, copper, lead and
zinc all jumped between 3 and 5 percent on hopes the Fed's move
would bolster global demand for manufacturing and building
Gold hit a 6-1/2-month high, putting it on course for
a fourth straight week of gains and extending Thursday's 2
percent rise. Spot gold stood at $1.771.06 an ounce at 1822 GMT.
German bond yields hit an 11-week high on Friday as low-risk
government bonds sold off after the Fed stimulus moves.
The yield on 10-year Italian bonds fell below
5 percent for the first time since March 26 and was down 4 basis
points on the day at 4.99 percent. Equivalent Spanish yields
stood at 5.82 percent.