The Federal Reserve's aggressive new plan to spark the U.S. economy lit a fire under risk assets on Friday, sending global stocks to a 13-month high and driving the dollar to a more than four-month low against the euro.
Brent crude oil rose to a four-month peak, the S&P 500 neared a five-year high and European shares rose to their highest in 14 months.
The Fed on Thursday said it would pump $40 billion into the economy each month until the jobs market shows sustained improvement. The aggressive action enhanced what was an already upbeat mood in financial markets since the European Central Bank announced plans to cut the borrowing costs of struggling euro zone members.
"Markets had expected more quantitative easing, but they hadn't expected (Fed Chairman Ben) Bernanke and the Fed to be as aggressive as they were," said Jeffrey Given, senior managing director and senior portfolio manager at John Hancock Asset Management in Boston.
"The Fed made it sound as if even after the economy recovers, interest rates will remain low. More people are moving into risky assets because Ben is not going to pull the punch bowl away," he said.
On Wall Street, stocks rose, with cyclicals and financials leading the way. An index of U.S. housing shares, aided by the Fed's plan to buy mortgage-backed securities, rose 2.8 percent.
The Dow Jones industrial average was up 34.67 points, or 0.26 percent, at 13,574.53. The Standard & Poor's 500 Index was up 5.93 points, or 0.41 percent, at 1,465.92. The Nasdaq Composite Index was up 32.17 points, or 1.02 percent, at 3,187.99.
In bond markets, yields on 10-year Italian government bonds fell below 5 percent for the first time since late March as the Fed's announcement enhanced the recently improved sentiment toward riskier assets.
In contrast, U.S. Treasuries prices fell and yields rose as investors chose assets they believed would offer better returns.
The benchmark 10-year U.S. Treasury note price fell 1-9/32, its yield rising to 1.86 percent from 1.73 percent late on Thursday.
Euro zone finance ministers were meeting in Cyprus on Friday, hoping to build on progress the bloc has made this month following the plans announced by ECB President Mario Draghi and a German court's green light this week for the euro zone's new ESM bailout fund.
Spain was being pressed to clarify whether it would seek the financial support which would clear the way for the ECB to buy its bonds. Questions remain whether Madrid could be tempted by the recent drop in its borrowing costs to tough it out without a politically unpopular EU bailout program.
European equities surged, with the pan-European FTSEurofirst 300 index rising 1.25 percent to 1,120.15. The MSCI index of global stocks jumped 1.5 percent to 339.69, near its highest since August last year.
The dollar index measured against a basket of currencies fell 0.5 percent to stand near four-month lows at 78.903 after the Fed's move.
The dollar's broad decline left the euro at a four-month high above $1.31, the latest in a string of technical and psychological levels it has cut through this week.
"With Europe getting their act together (at least temporarily), the Fed flooding the market with cash, and China talking (about) stimulatory infrastructure projects, the three largest influences of market dynamics could be creating a bull market for at least the near term," said Neal Gilbert, currency strategist at GFT Forex.
Brent crude oil rose 67 cents to $116.55 a barrel by 1735 GMT after reaching a four-month peak of $117.95. The global North Sea benchmark was on track to end the week up more than 2 percent.
U.S. crude rose 36 cents to $98.68 a barrel after hitting a four-month high of $100.42. It was set to close the week up 3 percent.
Base metals also rallied. Aluminium, copper, lead and zinc all jumped between 3 and 5 percent on hopes the Fed's move would bolster global demand for manufacturing and building materials.
Gold hit a 6-1/2-month high, putting it on course for a fourth straight week of rises and extending Thursday's 2 percent gain. Spot gold stood at $1.772.03 an ounce at 1708 GMT.
German bond yields hit an 11-week high on Friday as low-risk government bonds sold off after the Fed stimulus moves.
The shift to higher-yielding assets helped drive 10-year Italian bond yields briefly below 5 percent for the first time since May as positive sentiment grew after a week in which the euro zone successfully negotiated key obstacles on its way to resolving its three-year-old debt crisis.
Ten-year Italian yields fell below 5 percent for the first time since March 26 and were down 4 basis points on the day at 4.99 percent. Equivalent Spanish yields stood at 5.82 percent.
U.S. retail sales rose 0.9 percent in August, boosted by auto sales and high gasoline prices, but the underlying tone pointed to modest growth in the third quarter. Meanwhile, consumer prices rose 0.6 percent as the cost of gasoline rose.
But the markets paid the data little mind.
"The Fed has signalled that unemployment will be their main focus," Given said. "There's no reason to think the Fed - even with slightly better economic numbers - will take the punch bowl away. So, with the exception of unemployment, the market is not paying much attention to the data."