LONDON: World stock markets jumped on Thursday as investors chose to take the first hike in US interest rates since 2006 as a mark of confidence in the world’s largest economy.

The long-anticipated though modest increase in the federal fund rate also lifted the dollar but piled more pain on oil.

Asian shares had got the day off to solid start but things really starting rocking in Europe. Germany’s DAX surged over 3 percent, its biggest rise since August, and Britain’s FTSE 100 and France’s CAC 40 leapt 1.4 and 2.5 percent respectively. Wall Street was expected to open at least 0.4 percent higher.

China allowed its currency to slip for a 10th straight session, with the yuan reaching its lowest since June 2011. The steady decline puts pressure on other Asian currencies to depreciate to stay competitive.

US Federal Reserve Chairperson Janet Yellen’s assurances that further tightening would be gradual and dependent on inflation soothed markets after the Fed’s first rate increase in nearly a decade, which followed months of waiting and several false starts.

“They delivered what was the world’s worst-kept secret,” said Neil Williams, chief economist at fund manager Hermes in London.

“It was extremely well-telegraphed which I think is a sign of things to come.

“Central banks now have a lot of skin in the game because of their hugely bloated balance sheets. So if they take markets off-guard, they get hurt themselves.”

The rate forecasts, or dot points, from Fed members were a little higher than many expected, with 100 basis points of hikes pencilled in for next year and a terminal rate of 3.5 percent.

Fed fund futures dipped in response, yet the December 2016 contract implies a rate of only 0.83 percent, well below the 1.25 to 1.5 percent favored by the central bank.

Moves in the Treasury market were also modest. While yields on two-year notes touched their highest since April 2010, they had barely budged ahead of US trading at 1.0047 percent.

The premium over German yields nevertheless widened to 134 basis points, pretty much the biggest since late 2006 and a positive draw for the dollar.