Stock markets surged ahead after the half-point cut in interest rates was announced, with technology and telecom shares, in particular, benefiting from the improved sentiment that a major rates cut inevitably brings.
The technology-heavy Nasdaq index closed up 156.40 points at 2079.62 with the broader based Dow Jones Index surging nearly 400 points to 10614.21
In currency trading, the euro see-sawed wildly, falling to four-and-a-half month lows against the dollar at one stage before recovering.
Major European financial and industrial stocks also showed substantial gains, if not as dramatic as their New Economy rivals, as some in the market took the view that the Fed's action will mean the European Central Bank cannot indefinitely hold out against a cut in European interest rates.
Even before the shock announcement from the Fed, European markets had been sharply ahead - boosted by the better-than-expected overnight results from technology bellwether stock Intel.
When the Fed announcement came, technology and telecom stocks went through the roof although the gains on European markets did not match the early 10 per cent leap on Nasdaq.
Uncertainty gripped the euro as traders assessed the implication of the rate cut.
The Fed's move initially knocked the euro - already under pressure due to the European Central Bank's reluctance to ease monetary policy - to the year's lows below $0.87 but the currency was soon on the mend and had rebounded almost 2 per cent within as many hours. In late US trade, it stood at 881/2 US cents, up on the session.
But that was more due to concern about what provoked the Fed to move between policy meetings than because of a rush to take advantage of the quarter point premium the euro now offers over the dollar, analysts said.
Specialised European technology indices rose strongly with London's Techmark 100 index of technology stocks up 7.4 per cent and Frankfurt's Nemax all share index ahead 8.5 per cent. The pan-European FTSE Eurotop 300 Index rose 2.6 per cent while the Dow Jones Euro Stox 50 Index of European bluechip shares gained almost 3.5 per cent to a two-month high.
Economists said the decision to cut the leading US rate to 4.5 per cent had injected a dose of euphoria into pallid stocks markets, but warned that the effects could soon wear off.
"The immediate reaction of the market has been to give Federal Reserve chairman Mr Alan Greenspan the benefit of the doubt," said economist Mr Jeremy Hawkins of Bank of America. "But people might be a little bit concerned once the dust settles."
The rise in telecom stocks came at a good time for Vodafone, which this week has dispatched its offer document for the acquisition of Eircell. Vodafone shares closed almost 15p higher on 224p sterling. This puts a value of €1.76 on the shares of the demerged Eircell. In response, Eircom rose 10 cents to €2.60 in heavy trading on the Dublin market.
Most Irish technology shares were also much higher on the day, although some like Baltimore and Parthus are recovering from very low levels after recent heavy selling.
Non-technology shares also benefited from the surprise cut in rates by the Fed. The FTSE100 index was 2.2 per cent higher although Dublin's ISEQ index rose just 0.4 per cent.
