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Dow bursts through 13,400 as Fed pulls QE3 trigger

by Gavin Lumsden, Caelainn Barr, Dylan Lobo on Sep 13, 2012 at 16:35

Dow bursts through 13,400 as Fed pulls QE3 trigger

17.50: The Federal Reserve has unanimously agreed to embark on a third round of quantitative easing.

The Federal Open Market Committee voted by 11-1 to buy $40 billion of agency mortgage-backed securities each month. It also committed to maintaining Operation Twist, a programme which sees it swap short-dated securities for longer-term ones.

The Fed also extended its pledge to keep interest rates exceptionally low to at least mid-2015.

The news sent US stocks soaring with the Dow up 76 at 13,409 shortly after the decision. The S&P 500 was up 9 points at 1,445.

It said it was taking this action to support a strong economic recovery.

These actions, which together will increase the Committee’s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, the Fed said in an accompanying statement.

16.35 The FTSE 100 closed above 5,800 on hopes the US will pump more money into the system.

The blue chip index ended the day on 5,819, a gain of 38 points, on hope the Federal Reserve will decide at tonight's monthly rate meeting to embark on a third leg of quantitative easing.

In Europe the German Dax and French CAC 40 indices were less upbeat, suffering losses of 33 and 42 points respectively.   

Across the Atlantic the Dow was treading water, up 20 points at 13,354.

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