The dollar surged to a three-week high and government bond yields rose yesterday, one day after the US Federal Reserve took a more hawkish tone in its assessment of the economy as it announced the end of its six-year bond-buying programme.

Global equity markets rose, as Wall Street stocks jumped in afternoon trading and European shares gained as investors were heartened by surprisingly strong third-quarter economic growth in the United States.

While the Fed’s decision to no longer add to its holdings of Treasury bonds and mortgage-backed securities, a programme which at its peak pumped $85 billion a month into the financial system, investors were somewhat surprised by the central bank’s expression of confidence in the US recovery, despite global growth concerns. The policy statement prompted financial markets to rethink the growing consensus that the Fed’s first interest-rate hike would not be until late in 2015.

The Fed did note in its statement on Wednesday after its two-day meeting that overnight borrowing costs would remain near zero for a “considerable time.”

“The tone in the statement was relatively more hawkish than had been anticipated,” said Mohannad Aama, managing director of Beam Capital Management LLC in New York. “The FX markets have concluded an interest rate hike is going to happen probably sooner rather than later.”

The dollar rose 0.2 per cent against a basket of six major currencies and rose 0.2 per cent against the euro, to $1.2618. The benchmark 10-year Treasury note yield rose 7/32 in price to yield 2.296 per cent.

MSCI’s index of equities in 45 countries narrowly rose 0.04 per cent. The pan-European FTSEurofirst 300 index of leading companies ended 0.6 per cent higher at 1,327.58 points. The index has risen about nine per cent since a 13-month low hit on October 16.

The Dow Jones industrial average rose 210.61 points, or 1.24 per cent, to 17,184.92, the S&P 500 gained 13.8 points, or 0.7 per cent, to 1,996.1, and the Nasdaq Composite added 18.15 points, or 0.4 per cent, to 4,567.38.

Visa Inc surged 9.8 per cent as the biggest boost to both the Dow and S&P 500 a day after it reported adjusted earnings that topped expectations, and said the mobile payment industry would be a “great driver” for business.

Gold slumped to a three-week low just under $1,200 an ounce , pressured by the strong dollar. Oil also fell, with Brent crude down 0.7 per cent to $86.51 a barrel and US crude down 1.1 per cent to $81.25 a barrel.

In Brazil, the country’s currency, the real, and stocks rallied yester-day, a day after the central bank unexpectedly hiked interest rates, which signaled that President Dilma Rousseff may make market-friendly policy changes after her narrow re-election victory on Sunday.

The real jumped as much as three per cent while the benchmark Boves­pa index rose 2.8 per cent. The real had hit a nine-year low against the dollar on Monday after Rousseff defeated challenger Aecio Neves.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.