Post recession, the economy is surely and steadily recovering, and the impact can be clearly seen in the soaring stock markets. The US stock market recovery is being constantly backed by the Federal Reserve policies, and the Fed has recently announced that interest rates will continue to be kept low in the near future.
The Dow Jones industrial average, Standard & Poor’s 500-stock index and NASDAQ composite index have all touched significant highs for the first time since 2008. The indexes shot in the wake of the Fed’s announcement as well as the Bank of Japan’s assurance of increasing the loan lending to the banks in Japan. Bank of Japan has also assured that its lending rates will remain at current levels and will not be hiked anytime soon.
The Federal Reserve’s assurance of low lending rates boosted Wall Street stocks while Bank of Japan’s easy credit extension plans boosted the Nikkei 225 stock average. Hong Kong and China stock indexes have also followed suit.
Since Feb 8th, the Dow Jones index has jumped 7.9%. This needs to be viewed in perspective to the previous month’s 7.6% fall, but is still an indicator of investor optimism. Analysts are pointing to the steady and stable recovery, which is evident from the fact that the Dow has not shown volatile fluctuations in the recent past. This is a likely indicator of cautious investment by investors in the markets.
The Fed has also demonstrated its confidence in the economy by confirming its plan to curtail purchase of mortgage-backed securities. Stability in current inflation levels is also an encouraging sign. As the 16 countries using the Euro pledged their support to pulling Greece out of its financial crisis, the atmosphere has definitely turned hopeful. S&P’s willingness to look at Greece as relatively safe now has enhanced the value of the Euro. Even unemployment rates in Britain saw a decline from 7.9 % in January to 7.8%, the first decline since mid 2009.
According to a report by the Labor Department, February witnessed a huge drop in wholesale prices, the largest in 7 months. This was set off by the fall in energy prices. The decline in wholesale inflation was much better than expectations at 0.6%. However, the prices of products other than food and energy witnessed an increase of 0.1%. Oil prices have risen against expectations as the OPEC cartel has decided to keep the supply steady.