The policy shift was greeted with particular warmth in Germany, where economists and policymakers have challenged the Fed’s stimulus for years. In inflation-wary Germany, some officials likened the Fed’s loose monetary program to a drug to which the American economy was becoming addicted.
“On this side of the Atlantic, people might be more critical of unconventional measures,” said Bernd Weidensteiner, an analyst at Commerzbank. “Most people in the financial markets here think that they were rather late in starting to normalize policy.”
Germany’s DAX closed at a gain of nearly 1.7 percent, France’s CAC 40 was up 1.6 percent and Britain’s FTSE 100 was up 1.4 percent. European markets were also reacting to a new agreement to create an E.U.-wide system to deal with failing banks. Both developments signalled a move away from crisis-era policymaking, when major monetary and fiscal decisions were sometimes made as markets were tanking amid fears of a global financial meltdown.
The shift back toward normalcy was another reason that markets were rising, analysts said. In Japan, officials at the central bank explained their perspective on the Fed move this way to Kyodo News Agency: “If the yen depreciates further, it’s not a bad thing for the Japanese economy.” Some analysts there said they believe continuing yen depreciation and stock market increases could support the large-scale monetary-easing measures needed to get rid of deflation.
Bucking the trend, Hong Kong’s Hang Seng index fell 1.1 percent, and mainland China’s Shanghai Composite Index fell 0.95 percent.
Many blamed the fall on worries that the tapering will exacerbate the problem of liquidity in Chinese financial institutions.
“If the Chinese central bank doesn’t act, interest rates will go up, asset prices will face pressure, and stock market and house prices are likely to have a downside,” said Zhang Ming, an economics researcher at the Chinese Academy of Social Sciences.
Responding to such worries about liquidity problems and the potential for a credit crunch, the People’s Bank of China took the unusual step of announcing on the Chinese equivalent of Twitter late Thursday that it had performed a short-term liquidity operation.
For China, “the Fed’s announcement will not have substantial impacts until January, and now the impact is just on a psychological level,” said Zhao Xijun, a finance professor at Beijing’s Renmin University.
“But over the short-term, I believe the U.S. Fed’s decision will leave more positive influence on China’s exports,” Zhang said.
The acting chief executive of Hong Kong’s Monetary Authority, Eddie Yue, said in a statement: “The normalisation of the US monetary conditions will inevitably heighten market volatility. . . . As the US economy gradually recovers, fund flows may reverse, exerting downward pressure on asset prices in emerging markets.”
He said that to maintain banking stability, Hong Kong officials have reminded banks “to step up the management of liquidity and interest-rate risks.”
Birnbaum reported from Berlin. Li Qi contributed to this report.