Yahoo Finance European stocks rise after US Fed vows to pump trillions into markets
European stocks rose on Friday after the US Federal Reserve pledged to pump trillions into the financial system in the wake of Thursday’s huge market sell-off.
The pan-European STOXX 600 index (^STOXX), which had its worst day on record on Thursday due to deepening coronavirus panic, was up by almost 4.5% on Friday morning.
London’s FTSE 100 (^FTSE), which suffered its worst losses since 1987, rose by more than 4.9%.
Germany’s DAX (^GDAXI) was up by 3.8% and France’s CAC 40 (^FCHI), which also experienced sharp declines on Thursday, rose by around 4.6%.
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The New York branch of the Federal Reserve on Thursday promised to inject trillions of dollars into short-term funding markets, its third such move in four days, after investors warned that coronavirus-related market volatility posed problems for the bond market.
The Fed said that it would make the funding available in three tranches of $500bn (£397bn), and would start purchasing a broader range of US government bonds, known as treasuries, than it has thus far.
The unexpected move is yet another sign that the central bank may be ready to use a monetary policy toolkit not seen since the depths of the 2008 financial crisis.
“It feels appropriate that this week should end with a Friday the 13th. Yet following the worst session since 1987 — and the FTSE’s second-worst performance ever — investors were willing to give a rebound another go,” said Conor Campbell, a financial analyst at Spreadex.
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“Sweeping in at multi-year lows feels like a natural reaction to what went down on Thursday. Especially after the Federal Reserve attempted — if weren’t quite successful at — damage control by announcing a $1.5tn market-injection last night,” he said.
Stocks in Asia closed out the session in the red, taking their lead from investors in the US.
China’s SSE Composite Index (^SSEC) fell by 1.2% on Friday, while the Hang Seng (^HSI) was down 1.1% in Hong Kong at market close.
Japan’s Nikkei (^N225) fell by more than 6%. The KOSPI Composite Index (^KOSPI) in South Korea closed over 3.4% in the red.
Futures were also pointing to a higher open for US stocks, which also suffered their worst day since 1987 on Thursday.
S&P 500 futures (ES=F) climbed by 4.1%, Dow Jones Industrial Average futures (YM=F) rose by almost 4%, while Nasdaq futures (NQ=F) were up by more than 4.7% on Friday.
