European stock markets closed higher today after the US Federal Reserve surprised investors by sticking to its programme of economic stimulus, sending regional indexes to multi-year highs.

The US Federal Reserve said last night it would keep buying $85 billion in bonds per month, defying expectations it would start to scale back that programme by at least $5-10 billion.

The US Fed said it wanted more evidence of solid economic growth before it started to scale back the programme, and the Fed also cut its growth forecasts. 

Earlier, Asian shares and currencies flew higher after the Fed decision. From Jakarta to Manila, Tokyo to Sydney investors celebrated the prospect of prolonged stimulus in the world's largest economy.

MSCI's broadest index of Asia-Pacific shares outside Japan jumped 2.3% to a four-month peak. Indonesia's main stock index climbed 4.4%, the Philippines 3.1%, Australia 1.1% and Japan's Nikkei 1.8%.

The chance that US interest rates could stay low for longer was further enhanced by news from the White House that noted-dove Janet Yellen was the front-runner to take over the Fed when Ben Bernanke steps down in January.

All of this was a huge relief to emerging markets, which have been suffering as higher yields in the rich world attracted away much-needed foreign capital.

The Fed's decision to keep its asset buying at $85 billion amonth was seen as a rebuff to the sharp rise in Treasury yields over recent months, which was proving a headwind for the housing market and the US economy in general.