World markets soar but UAE tepid on US$600bn boost

Stocks and commodities around the globe rose after the US announced more quantitative easing.

Powered by automated translation

The QE2 sailed around the globe yesterday, delivering good news.

Global stock and commodities markets soared yesterday after the US government launched a historic second round of quantitative easing - or QE2 - to bolster the economy.

Several global indexes reached two-year highs as the dollar continued to fall, although UAE bourses bucked the trend and ended the day mixed.

The US Federal Reserve said on Wednesday it would buy a further US$600 billion (Dh2.2tn) of treasuries through to June next year, expanding a stimulus programme to cut unemployment and avert deflation.

The central bank said it would buy about $75bn in longer-term Treasury bonds a month and adjust the amount depending on the path of the recovery. It added that it will keep interest rates low for an "extended period."

The dollar fell 0.9 per cent against the euro on the news yesterday evening.

Asian stocks led the momentum. They were first to react to the Fed's announcement. Japan's Nikkei 225 Average closed 2.2 per cent higher to 9,358.78 points.

Hong Kong also cheered the Fed's moves as the Hang Seng Index rose 1.6 per cent to 24,535.63.

Although the Fed's measures fell short of the most bullish stimulus projections of as much as $2tn, US stocks also opened sharply higher yesterday.

The Dow Jones Industrial Average surged more than 100 points in early trading yesterday.

In London, afternoon trading saw the FTSE 100 reach its highest point this year, adding 1.9 per cent to 5,858.34 points.

But the reaction from UAE bourses was muted.

The Dubai Financial Market General Index gained 0.1 per cent to 1,737.72, after initially opening in negative territory, while the Abu Dhabi Securities Exchange General Index dropped 0.4 per cent to 2,750.70.

Bank of America (BofA) Merrill Lynch said in a note yesterday the UAE would benefit from the Fed's actions more than most economies because a weakening dollar would encourage investors to turn to commodities.

"This is the medicine [the UAE] needs the most," said Turker Hamzaoglu, an analyst at BofA Merrill Lynch.

Oil jumped to fresh highs of $87.91 a barrel in response.