US Federal Reserve approves QE3

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Earlier today, the US Federal Reserve Open Market Committee (FOMC) approved another round of unconventional monetary stimulus, agreeing to deliver the third set of quantitative easing (QE3).

The plans announced by US Federal Reserve Chairman, Ben Beranke, were welcomed by investors and traders as financial markets across the globe witnessed a buying spree that sent global equities surging higher. 

CMC Markets, Senior Trader, Tim Waterer said:

“The FOMC’s plan to spend US$40b per week on mortgage-backed securities, which came with no conclusion date, showed traders that the FOMC is digging its heels in. This aggressive move served to comfort US investors, so much so that the Dow and S&P500 have hit December 2007 levels.

“The exuberant buying witnessed in the US last night is similarly being played out across Asian markets today.  With investors clearly pleased with the heavy-handed approach by the Federal Reserve in tackling the struggling US economy.

“Locally the Australian market looks set to end the week in sprightly fashion.  Mining stocks, not surprisingly, are among the best performers given the rosier outlook on the US economy post the Fed announcement. The ASX200 looks like it has a fair chance to conclude the week close to the 4400 level if buying enthusiasm can be maintained in the afternoon trading session.

“Whether the QE3-inspired rally can show some longevity remains to be seen. Whilst the markets have been served a dose of good news this week, the shot of adrenaline may only last as long as the point where economic indicators abroad remind us that global growth remains precarious at best.”

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