European stocks rebound after Fed pledges low rates

LONDON: European stocks rallied in opening deals on Wednesday, driven by sharp gains in Asia and on Wall Street overnight after the US Federal Reserve said it would hold near-zero interest rates for two years.

London's benchmark FTSE 100 index of leading companies jumped by as much as 1.8 percent, Frankfurt's DAX 30 leapt 2.09 percent and in Paris the CAC 40 gained 1.88 percent.

Madrid soared 2.14 percent and Milan added 2.8 percent at the open, boosted also after the European Central Bank signalled it would purchase government bonds from struggling debt-laden eurozone member nations to ease their borrowing costs.

The Fed pledged Tuesday to hold interest rates near zero for two more years to help an economy facing increased risks of stalling and amid recent turmoil on global financial markets.

But the Fed offered no successor to the $600 billion "QE2" stimulus programme that wound up in June although it did say it was reviewing available tools to boost a slowing economy.

Meeting as worries grew of a new US recession, the Fed's policy board admitted growth had been "considerably slower" than expected so far this year.

The US central bank maintained its key interest rate at the record low 0.0-0.25 percent -- in place since December 2008 -- and vowed to keep "exceptionally low" rates "at least through mid-2013."

In reaction, New York share prices soared Tuesday, with the Dow jumping nearly four percent, one day after plummeting on the shock of Standard & Poor's downgrade of Washington's top AAA credit rating.

The Dow Jones Industrial Average of 30 blue-chip stocks closed up 3.98 percent at 11,239.77 points.

Copyright AFP (Agence France-Presse), 2011