Fed lifts equities with outlook on rates, growth

RELATED NEWS Bernanke to defend Fed role on smaller bank supervision US mkts close higher on Fed's commitment for low int rates Fed seen renewing low rates, extended period vow

World stocks climbed on Wednesday in response to a relatively optimistic outlook from the US Federal Reserve combined with a pledge to keep interest rates low.

Worries about Greece's debt crisis also eased after rating agency Standard & Poor's removed the threat of an immediate downgrade.

MSCI's all-country world stock index was up 0.6%with Europe's FTSEurofirst 300 up 0.4%around a two-month high.

Earlier Japan's Nikkei closed up 1.17%and Wall Street looked set to continue the upwards trend after hitting 17-month highs on Tuesday. Japanese stocks were boosted by the Bank of Japan's decision to loosen monetary policy.

The Fed essentially presented equity investors with the best of all worlds, saying that it was keeping interest rates near zero and would do so for an extended period, but also pointing to increased momentum in the US economy.

"There was no new bad news so this is good. I think the market can continue its upward trend to the end of the quarter," said Giuseppe-Guido Amato, strategist at Lang & Schwarz in Frankfurt.

Investors entered the year fearing the gradual withdrawal of loose monetary policy by the world's central banks, but the expected timing of the shift has been pushed back.

Some 70%of respondents in a Bank of America Merrill Lynch fund manager poll this month said the Fed would not tighten policy until the fourth quarter at the earliest, with nearly 40%seeing it holding off until next year.

Half the respondents said that the European Central Bank would not tighten until 2011.