World stock indexes surged to record highs on Thursday while the dollar traded close to a one-month low after the Federal Reserve hiked U.S. interest rates but signalled no pick-up in the pace of tightening, and Europe breathed a sigh of relief over Dutch election results. Ivor Bennett reports.
Rate hikes can set the alarm bells ringing but this time, the Fed had markets ringing out in joy. Not so much the hike itself but the signal that further hikes would only be gradual. After all, no one wants a recovery that's too quick. But it was bad news if you'd bet on the opposite. Sovereign bonds saw their biggest daily drop since June. While the dollar sank to a three-week low. (SOUNDBITE) (English) LCG SENIOR ANALYST, JASPER LAWLER, SAYING: "There was no change in forecast, so that was really the reason that the dollar sell-off on a sort of profit-taking event, if you like. Obviously, policy divergence is still taking place. The Fed are lifting rates, other central banks are still on hold or easing policy. But there's no signs that that gap is widening at the moment." But the euro saw its steepest rise in nine months. Climbing 1.2 percent on the added bonus of the Dutch election result. The challenge of Geert Wilders' far-right anti-Eu party was seen off. Populism proving not as popular as many had feared. But the sense of relief may not last long. (SOUNDBITE) (English) LCG SENIOR ANALYST, JASPER LAWLER, SAYING: "If there was a destabilising event like a Marine Le Pen victory in France, I don't think that the economy's going to roll over, but I think confidence would take a hit. And that, eventually, is going to have economic consequences." The French election is less than 6 weeks away. Even if the polls don't predict a win for Marine Le Pen, markets know that now nothing is certain.