European stocks rose on Friday after the US Federal Reserve pledged to pump trillions into the financial system in the wake of Thursday’s huge market sell-off.
The pan-European STOXX 600 index (^STOXX), which had its worst day on record on Thursday due to deepening coronavirus panic, was up by almost 4.5% on Friday morning.
London’s FTSE 100 (^FTSE), which suffered its worst losses since 1987, rose by more than 4.9%.
The New York branch of the Federal Reserve on Thursday promised to inject trillions of dollars into short-term funding markets, its third such move in four days, after investors warned that coronavirus-related market volatility posed problems for the bond market.
The Fed said that it would make the funding available in three tranches of $500bn (£397bn), and would start purchasing a broader range of US government bonds, known as treasuries, than it has thus far.
The unexpected move is yet another sign that the central bank may be ready to use a monetary policy toolkit not seen since the depths of the 2008 financial crisis.
“It feels appropriate that this week should end with a Friday the 13th. Yet following the worst session since 1987 — and the FTSE’s second-worst performance ever — investors were willing to give a rebound another go,” said Conor Campbell, a financial analyst at Spreadex.
“Sweeping in at multi-year lows feels like a natural reaction to what went down on Thursday. Especially after the Federal Reserve attempted — if weren’t quite successful at — damage control by announcing a $1.5tn market-injection last night,” he said.
Stocks in Asia closed out the session in the red, taking their lead from investors in the US.
Futures were also pointing to a higher open for US stocks, which also suffered their worst day since 1987 on Thursday.