Fed's asset purchases buy some confidence

Australian shares are tipped to open higher this morning after global markets surged.

Australian shares are tipped to open higher this morning after global markets surged.

AUSTRALIAN shares are tipped to open higher this morning after global markets surged on the weekend when the US Federal Reserve began a third round of asset purchases.

The S&P/ASX 200 Futures Index yesterday indicated local shares would open 20 points higher, at 4412 points, while European and US stocks were also expected to open strongly later today.

The US Federal Reserve's Federal Open Market Committee issued an open-ended pledge last week to buy $US40 billion ($A38 billion) of mortgage-backed bonds until the US economy improves, while pushing out the window of lower interest rates at the same time.

The bid to stimulate the world's biggest economy, which has for several months struggled to match growth in employment with population growth, injected considerable confidence into global markets, with US and European markets surging on Friday after Australia's market closed.

London's FTSE 100 Index finished up 1.64 per cent, while the Dow Jones Industrial Average rose 53.51 points, or 0.40 per cent.

The news lit a fuse under the Australian dollar, which jumped to a one-month high of US105.72?, as foreign investors piled into the currency to take advantage of Australia's comparatively high interest rate - one of the highest in the developed world.

Analysts said it would be positive for the sharemarket overall, but companies that make a large portion of their profits offshore would feel some pressure.

''It's very positive for sentiment because we know the last two quantitative easing [programs] that the Fed have implemented have ended up leading to overall lower funding costs, and we get pulled along on the back of that,'' ATI Asset Management's David Liu said.

''But US-dollar denominated companies such as Brambles, CSL, and News Corp will have [a] translation impact from the high currency.''

The Reserve Bank prepares to release tomorrow the minutes of its September meeting, where it left the official cash rate unchanged at 3.50 per cent.


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