Global stocks’ Fed-inspired rally fizzles out

AP and AFP

LONDON/HONG KONG–The rally in global stock markets fizzled out on Friday, two days after the U.S. Federal Reserve buoyed sentiment by keeping its monetary stimulus program in place.

Many traders had expected the Fed to start scaling back its asset purchase program, instituted in the aftermath of the 2008 financial crisis to help keep the U.S. economy afloat. The program was used to increase the flow of money available for loans to push down interest rates and spur growth.

The low interest rate environment proved a boon for stock markets, to where investors fled with their money in search of higher returns.

That is a key reason why stock markets rejoiced when the Fed left its “quantitative easing” program untouched earlier this week — even though the Fed is maintaining the program because the U.S. economic recovery is weak.

By Friday, however, that enthusiasm had worn off.

Britain’s FTSE 100 was down marginally at 6,623.52 while Germany’s DAX edged up 0.1 percent to 8,702.64. France’s CAC-40 was almost 0.1 percent higher at 4,208.87.

Wall Street was expected to dip on the open, with Dow Jones industrial futures down 0.2 percent at 15,570. S&P 500 futures were down almost 0.1 percent to 1,716.75.

Asian shares fell Friday after a global rally powered by the U.S. Federal Reserve’s decision to maintain its vast stimulus program faltered, with a surprise interest rate hike dragging down Indian stocks. Tokyo slipped 0.16 percent, or 23.76 points, to 14,742.42 as the dollar held firm on better-than-expected U.S. economic data. Sydney fell 0.36 percent, or 18.8 points, to 5,276.7. Mumbai fell 1.85 percent after India’s new central bank governor, Raghuram Rajan, surprised markets with a bold decision to hike interest rates on fears of rising inflation. Rajan increased the benchmark interest lending rate to 7.50 percent from 7.25 at his first policy review meeting since taking the reins.