* World shares extend gains, U.S. stocks surge
* U.S. government debt reverses losses to trade higher
* Dollar pares gains against euro, rises against yen
* Oil extends gains after Fed announcement
By Herbert Lash
NEW YORK, Dec 18 Global equity markets extended
gains and the dollar fell on Wednesday after the Federal Reserve
finally began to wind down its economic stimulus, answering the
question on tapering that has loomed over markets and sending a
signal that the U.S. recovery was well on its way.
The benchmark S&P 500 and the Nasdaq rebounded after the Fed
said it would reduce its monthly asset purchases by $10 billion
to $75 billion.
The euro reversed losses to trade higher against the dollar,
while the greenback hit session highs against the yen. Spot gold
traded up slightly, and oil prices extended earlier gains.
The benchmark 10-year U.S. Treasury also reversed losses to
"We were surprised about the decision to taper, but given
the news this (market move) was as we expected. It was almost a
no-lose situation with the uncertainty removed from the market
place," said Erik Davidson, deputy chief investment officer at
Wells Fargo Private Bank in San Francisco.
"The reason the market is up as it is is this is 'bad news'
investors have been waiting for and is finally out of the way.
It is fodder for possibly better markets because it affirms the
economy is healing."
MSCI's all-country world equity index rose
extended gain, rising 0.83 percent.
The Dow Jones industrial average rose 150.14 points,
or 0.95 percent, to 16,025.4. The S&P 500 lost 3.98
points, or 0.22 percent, to 1,777.02 and the Nasdaq Composite
added 7.646 points, or 0.19 percent, to 4,031.326.
Before the announcement, stocks in Europe rose. The
pan-European FTSEurofirst 300 index of leading regional
shares advanced after think-tank Ifo reported German business
morale in December was at its highest since April 2012.
The FTSEurofirst 300 rose 0.85 percent to close at 1,259.06
points, and the euro zone's blue-chip Euro STOXX 50 index
jumped 1.13 percent to 2,975.09.
The 10-year Treasury note rose 4/32 in price to
yield 2.8281 percent.
German bonds initially rose after news that Germany plans to
cut debt issuance to the lowest level since 2007 next year. But
gains were limited as investors awaited the Fed's decision.
German Bund futures settled down 15 ticks at
140.14, after earlier rising as high as 140.49.
The euro last traded up 0.2 percent at $1.3795, while
the dollar rose 0.59 percent against the yen to 103.27
Brent crude oil futures shrugged off the Fed' decision to
begin tapering, maintaining its gains that widened its premium
to U.S. crude.
Brent crude rose $1.06 to $109.50 a barrel, and U.S.
oil settled up 58 cents at $97.80 a barrel.