FTSE surges ahead as US fed rate hike sends global equities higher

London’s blue chip share index has powered higher as the first US interest rate hike for nearly a decade sent global equities surging.

Investors cheered the US Federal Reserve’s move to increase its key interest rate by 0.25%, marking the first rise since June 2006 and ending a year of uncertainty over US monetary policy.

The FTSE 100 Index leapt 1.6% higher after strong overnight gains on Wall Street and in Asia, with the Dow Jones Industrial Average in America closing 1.3% ahead.

Other indices in Europe were also posting strong gains, with the Dax in Germany up 2.3% and France’s Cac 40 up 2.1%.

The jubilant mood was helped as comments from Fed chairwoman Janet Yellen suggested the path of future rate rises in the world’s biggest economy would be slow and gradual.

Tony Cross, market analyst at Trustnet Direct, said: “London’s FTSE-100 has bounded higher at the open, supported not only by the fact that Janet Yellen drew a line under the financial crisis – at least on the other side of the Atlantic – by hiking interest rates for the first time in almost a decade, but also accompanying this with a dovish call.

“Yes, more rate hikes will follow, but they will be gradual – and there’s no real expectation of the US hitting inflation targets before 2018.”

Mike McCudden, head of derivatives at stockbroker Interactive Investor, cautioned the recent turbulence on financial markets could return to haunt stocks.

He said: “Whether or not this rally has legs remains to be seen, but with warning signs continuing to emanate from China, those joining the party too late could be in for a rude awakening.

“There will be many more bumps ahead on the long road to recovery, but for now, investors are taking a modicum of confidence from the US move.”