All three major US indices made strong gains yesterday after the Federal Reserve kept interest rates unchanged and the price of oil dropped below $120. Although the rate decision was widely expected, it was the accompanying statement that really cheered investors. It suggested that although inflation was a worrying issue, the Fed would be in no rush to raise borrowing costs in the coming months. Adding to the buoyant mood, a report from the Institute of Supply Management showed the US service sector contracted less than expected in July.
The Dow Jones rallied 331.21 points to end at 11,615.36, the S&P 500 jumped 35.59 points to close at 1,284.60 - both enjoying their best day in four months. The Nasdaq surged 64.27 points to finish at 2,349.83.
AIG led insurers higher after UBS upgraded the shares to a "buy" from "neutral". The broker said the company was well-positioned to absorb further losses while not needing to raise capital. Shares soared 12%, while the S&P financials sub-index gained 5%.
Procter & Gamble gained 3.3% following stronger than expected quarterly profit. The figure came in 33% higher than the previous year with the company citing price increases, overseas sales and tax benefits as the main catalysts.
After the bell, Cisco Systems posted fourth quarter earnings and revenue that beat expectations. Profit for the company stood at $2 billion, compared to $1.9 billion a year earlier.
US light crude oil for September delivery fell $2.24 to settle at $119.17, the first time in three months that it has been below $120.
COMEX gold for December delivery dropped $21.70 to $886.20 an ounce.
Treasury prices were little changed, with the yield on the 10 year note rising to 3.97% from 3.96%.
The Nikkei advanced 340.23 points to close at 13,254.89 this morning. The decline in oil prices appeared to be the main driver as investors hoped that production costs will ease and consumer spending will rebound. Mazda Motor Corp led car makers to their biggest gains in two weeks, while Bridgestone Corp, the world's biggest tyre maker by sales, surged the most in four months. Elsewhere, Konami Corp rallied after posting its biggest quarterly profit gain in two years.
The Hang Seng is unchanged today after the Hong Kong Exchanges & Clearing Ltd cancelled trading as Severe Tropical Storm Kammuri buffeted the city.
The FTSE is currently 15.6 points higher at 5,470.10. Lonmin sits on top of the risers board following news that Xstrata is planning to launch a cash offer at £33 a share, a 42% premium to Lonmin's closing share price on Tuesday. Shares in Lonmin, the world's third largest platinum producer are currently 47% higher £34.07p. Other than mining companies, The London Stock Exchange features in the top 10 risers after Goldman Sachs gave the shares a "neutral" rating and the Deutsche Boerse a "buy" rating. ITV tops the fallers board after poor advertising revenues and a grim outlook for the future.