European shares surged in early trading on Thursday after investors saw the US Federal Reserve’s move to raise interest rates for the first time in nearly a decade as a sign of confidence in the world’s biggest economy.
The pan-European FTSEurofirst 300 index was up 1.8 per cent at 1,441.51 points by 0804 GMT after climbing to a one-week high, while Germany’s DAX, France’s CAC and Britain’s FTSE 100 rose 1.4 to 2.1 per cent.
The Fed made clear that the 25-basis point rate hike was a tentative beginning to a “gradual’’ tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.
“With the Fed out of the way and only a couple of trading sessions left before Christmas, we could now see a traditional end-year rally. The new year will once again prove to be quite volatile as markets will start to anticipate the next rate hike,’’ Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said.
The Fed’s policy statement noted the “considerable improvement’’ in the US labour market, where the unemployment rate has fallen to 5 per cent. It also added that policymakers were “reasonably confident’’ inflation will rise over the medium term to the Fed’s 2 per cent objective.