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Business

Global stocks rally on US rate hike

Stocks around the world have surged after the Federal Reserve raised its interest rate for the first time since the financial crisis. Germany's Dax led the pack in early trading, following sharp gains on Asian markets.

The world's stock markets have been trading higher on Thursday as investors took the first hike in US interest rates in nearly a decade as a mark of confidence in the world's largest economy.

Germany's DAX climbed 3 percent in early trading, while Britain's FTSE 100 rose 1.5 percent and France's CAC 40 advanced 2.6 percent. The euro traded lower against the dollar, dropping to $1.0860. The greenback also advanced against other major currencies.

News of the rate rise also sent Asia-Pacific stock markets surging for a second straight day. At the sound of the closing bell, Japan's Nikkei had jumped nearly 1.6 percent, Hong Kong's Hang Seng Index had climbed 0.8 percent, while in Shanghai the stock exchange was up more than 1.8 percent. And in Sydney, the ASX 200 finished close to 1.5 percent higher.

The hike was widely expected and the positive reactions reflect a sense of relief that the central bank in Washington finally considers the fundamentals of the US economy strong enough to close the chapter on eight years of aggressive monetary policy, marked by record-low, near-zero interest rates.

The US Federal Reserve's decision to

raise its benchmark funds rate

to 0.25-0.50 percent also marks the first hike since 2006.

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Federal Reserve chair Janet Yellen said the move "[recognized] the considerable progress that has been made towards restoring jobs, raising incomes, and easing the economic hardship of millions of Americans," since her predecessor Ben Bernanke slashed rates to almost zero at the height of the financial crisis in 2008 meant to stimulate economic growth.

The Fed said it expected growth to reach 2.4 percent next year, in spite of a slowdown in most other world economies, especially China.

Yellen said the decision showed that the US had reaffirmed its place as a "source of strength to the emerging markets and other economies around the globe."

es/tko/pad (dpa, AFP, Reuters)

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