European markets rally on Fed low-rates pledge

European stocks rallied Thursday and the euro hit a one-month dollar high, after the Fed vowed to keep interest rates near zero for at least the next two years and investors waited on Greek debt talks. In late morning deals, London\'s FTSE 100 index of top shares rose 0.99 percent to 5,779.71 points, Frankfurt\'s DAX 30 index soared 1.26 percent to 6,502.67 points and the Paris CAC 40 won 0.93 percent to 3,343.32. The European single currency surged to $1.3175 despite Greece\'s ongoing struggle to agree a writedown on its huge debts with its creditors. That was the euro\'s highest level since December 21 and compared with $1.3103 late in New York on Wednesday. The US Federal Reserve said Wednesday that it expects interest rates to stay at \"exceptionally low levels\" at least until late 2014, extending its forecast from the previously stated mid-2013. Traders also speculated that the central bank could also decide to implement another round of stimulus in the form of quantitative easing (QE). \"Yesterday\'s news from the Fed pushing out the low interest rate target to 2014 has delivered a modicum of support in early European trade, with the FTSE nudging its way higher as a result,\" said analyst Mike McCudden at online brokerage Interactive Investor. \"There\'s also a growing expectation that we\'ll see QE3 emerging from the Fed too, although with the market clearly supported by this line, any signs of delay could well initiate another round of broad-based selling. \"Eurozone debt concerns also remain very much front of mind and any hint of deterioration here could again see risk appetite plummet amongst investors.\" In Athens, the lead negotiators for the banks and insurers that hold much of Greece\'s debt were to arrive for informal talks on a deal that Greek officials say could be reached this week. Creditors from 32 banks, insurers and investment funds owed money by Greece and grouped within the Institute of International Finance also decided Wednesday to send a team of experts to assist the negotiations on a writedown of Greek debt worth an expected 100 billion euros ($131 billion). An IIF statement said that Charles Dallara and Jean Lemierre, co-chairmen of the negotiating team, would return to Athens as well \"for informal discussions.\" Greek officials are seeking an accord on a Private Sector Involvement (PSI) deal under which creditors would sign off on a 50 percent cut on the 200 billion euros in debt they hold. Talks have been hung up on the amount of interest to be paid on the remaining debt. Greece is struggling to reduce aggregate debt of at least 350 billion euros, the equivalent of 160 percent of the country\'s annual output. Wall Street had rallied overnight after the US Federal Reserve\'s decision to hold interest rates near zero for another three years, while Apple\'s blockbuster earnings also lifted sentiment. New York\'s Dow Jones Industrial Average 0.66 percent to its highest level since May 10. Asian markets took the latest Fed rates pledge in their stride on Thursday. Hong Kong, which was returning after a three-day holiday for Lunar New Year, jumped 1.63 percent and Seoul added 0.25 percent, while Tokyo fell 0.39 percent. Sydney, Shanghai, Mumbai and Taipei were closed for public holidays. \"Investors are considering the implications of the decision not to raise rates until late 2014 or beyond,\" said GFT analyst Fawad Razaqzada. \"While this appears to bring certainty for the US interest rate outlook, some analysts are concerned that the Fed has painted itself into a corner, and will find it difficult to alter course if economic conditions change. \"The Fed also opened the door to the possibility of additional stimulus and expects inflation to undershoot its target rate.\" Markets have been on a generally upward arc since the beginning of the year as the US economy shows tentative signs of recovery while officials in Europe strive to solve their debt crisis.