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Markets steady ahead of expected Fed action

Pan Pylas, AP Business Writer

FILE - In this Tuesday, Dec. 11, 2012, file photo, trader Anthony Riccio works on the floor of the New York Stock Exchange. Expectations that the Federal Reserve will announce a new stimulus plan to help bring life to a lethargic U.S. economy boosted stock markets in Asia, where investors brushed off North Korea's latest test launch of a long-range rocket. (AP Photo/Richard Drew, File)

LONDON (AP) -- Markets maintained their gains Wednesday after the U.S. Federal Reserve announced plans to spend $45 billion a month buying up bonds in an attempt to sustain an aggressive drive to keep long-term interest rates low.

News of the next round of quantitative easing helped buoy markets despite concerns over the lack of a budget deal and North Korea's test launch of a long-range rocket.

The Fed has launched three previous rounds of QE since the financial crisis hit in 2008 and they have been widely credited with shoring up financial markets.

In Europe, Britain's FTSE 100 closed 0.35 percent higher at 5,945 while Germany's DAX rose 0.33 percent to 7,614. The CAC-40 in France closed marginally higher, 0.01 percent at 3,646.

In the U.S., the Dow Jones industrial average was up 0.5 percent at 13,313 while the broader S&P 500 index rose 0.67 percent to 1,437.

Now the Fed has made its move, investors will be keeping a close watch on the budget discussions in the U.S., with only 19 days to go before a deal needs to be agreed to avoid the "fiscal cliff" of automatic spending cuts and tax increases at the start of next year.

"I expect negotiations to continue over the next couple of weeks with very gradual progress, which will be reflected in the markets with small but consistent gains," said Craig Erlam, market analyst at Alpari.

Greece is also in focus after the country's debt management agency said a bond buyback auction had been completed.

The agency said Wednesday that the country will buy back €31.9 billion ($41.5 billion) worth of its bonds, a key part of a package of measures designed to get the country's mountainous debt back to sustainable levels over the next decade.

The successful buyback deal was a major requirement before Greece could be granted a long-delayed installment of its international bailout funds. Athens expects the €34.4 billion payment to be approved by its creditors on Thursday.

Relief that Greece will likely get the money helped support the euro despite figures showing a surprise 1.4 percent monthly drop in industrial output across the 17 countries that use the euro. The euro was 0.7 percent higher at $1.3093.

Earlier in Asia, stocks posted gains in spite of Pyongyang's successful launch of a long-range rocket early in the day. The action, condemned by the U.S., South Korea and Japan, is believed to have been a test of technology seen as crucial to advancing North Korea's nuclear weapons ambitions.

Despite the launch, Japan's Nikkei 225 index rose 0.6 percent to 9,581.46, its highest close since late April. Advances on the Nikkei were largely attributed to the yen's recent weakness against the dollar and the euro. Hong Kong's Hang Seng added 0.8 percent to 22,503.3 while South Korea's Kospi gained 0.6 percent to 1,975.44.

Oil prices tracked equities as OPEC oil ministers agreed to maintain their present oil output ceiling — the benchmark New York rate was $1.23 higher at $87.02 a barrel.