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DAX lifted by Fed

The German equity market has been boosted the US Federal Reserve’s announcement last night.

The DAX is trading at 9310, up 1.4% after the US central bank reduced the size of its bond-buying scheme and issued a dovish statement in the same communication.

The move by the Fed to reduce the size of its quantitative easing programme scheme took some traders by surprise; this would ordinarily put pressure on equities, but the statement that followed encouraged investors to go long.

The Fed stated that interest rates will remain at historic lows for the foreseeable future – the new short-term target to anchor its monetary policy is 6.5% unemployment. The US central bank has made it clear that monetary policy will remain loose until the jobless rate declines to an acceptable level.

Equity markets in Italy and France are up 1.5% and 1.55% respectively on the back of the Fed statement. The cost of borrowing for the Spanish government has fallen from 4.16% to 4%, which is a sign that investors are confident in Madrid’s ability to repay its debts; the Spanish equity benchmark is up 2.2%.

Germany 30 chart

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