FTSE 100 soars after Fed spurs US bounce

The FTSE 100 index was up 2% by mid-morning trading on Thursday, after the US Dow Jones Industrial Average closed nearly 4% higher on Wednesday following comments from the US Federal Reserve that a September interest rate hike now looks unlikely.

After one of the worst global sell-offs since 2008 on Monday and Tuesday, president of the New York branch of the Federal Reserve William Dudley said that the prospect of an interest rate hike in September now seemed "less compelling" than earlier in the month.

Dudley's comments were met warmly by markets, with the US's S&P 500 index following the Dow Jones' rally to end the day 3.9% higher at 1,941, and the Nasdaq Composite closing 4.2% up at 4,698.

Chinese rebound

European markets joined the Footsie in an early rally on Thursday, with Germany's DAX, France's Cac 40 and Spain's Ibex 35 all up between 2.6% and 3.2% by 10.40am.

China's market - the genesis of Monday's global meltdown - also enjoyed a strong trading session as the Shanghai Composite index closed 5.3% up at 3,083 on Thursday (Beijing time) after the index shed more than 17% between Monday and Wednesday.

This comes after China's government implemented a number of measures to support markets, including cutting interest rates and injecting $22 billion (£14.2 billion) into the Chinese economy in the form of short-term loans.

Commenting on global market moves, David Madden, market analyst at IG, warns that the current feeling of optimism may not last.

"The phrase 'dead-cat-bounce' has been bandied about this morning, and unless we have a fresh round of buying then the rally will unravel. This week traders have been tricked into buying up cheap stocks thinking the correction is here to stay, only to have their fingers burnt," Madden says.

"The markets are very sheepish at the moment and everyone is waiting for someone else to make the first move. The sense is that dealers are anticipating a big move in either direction, but for now the fear factor is too great. It will take a lot more than one good trading session in Asia to convince dealers that everything is back to normal."

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