Markets Rally as Fed Announces QE3

THURSDAY MARKET UPDATE: Markets jump after the US Federal Reserve announces another round of quantitative easing

Alanna Petroff 13 September, 2012 | 5:57PM
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US stock markets surged higher on Thursday after the US Federal Reserve satisfied market expectations and announced another round of quantitative easing to help stimulate the American economy. The Federal Reserve announced it will buy $40 billion in American mortgage-backed securities each month and will continue making these purchases until the US labour market significantly improves.  

The easing, nicknamed QE3, was announced after the UK markets had closed for the day. Since many investors had been expecting an announcement of further quantitative easing from the States, there was a generally positive mood in the UK markets. The FTSE 100 index managed to end the day with a solid gain. The benchmark index of large-cap companies rose by 38 points, or 0.7%, to close the day at 5,820. The FTSE 250 mid-cap index also pushed up by 35 points, or 0.3%, to close at 11,847.

While the majority of FTSE 100 companies saw market gains, there were two key laggards—BAE Systems (BA.)and the retailer Next (NXT).

Shares in BAE deflated after a fast, strong rally in the previous trading day. Investors were first excited upon hearing that BAE and Euronext-traded EADS (EAD) were considering a merger, but now concerns have taken hold. Investors are worried about the companies' ability to secure regulatory, political and shareholder approval for the potential deal.

Meanwhile, shares in Next fell by nearly 8%, making it the biggest laggard of the day on the FTSE 100.

“Next has disappointed markets with its first-half results publication,” stated Mike van Dulken, head of research at Accendo Markets. “While the financials for the period were solid, as has been the case throughout most of the financial crisis ... comments on recent trading were negative and most importantly vague, suggesting uncertainty and a tough outlook for the second half of the year.”

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BAE Systems PLC1,325.00 GBX1.92Rating
Next PLC9,552.00 GBX1.88

About Author

Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.

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