By Robb M. Stewart 
 

MELBOURNE, Australia--Australian equities surged to fresh multiyear highs Thursday, swept along with rallies across the region after the Federal Reserve's surprise decision to stick with its stimulus measures.

Shares had been treading water ahead of the Fed's policy meeting as investors prepared for the central bank to possibly begin tightening its quantitative easing program, but instead the Fed elected not to pull back on a US$85 billion monthly bond-buying program.

"The Fed pulled the rug out from market expectation worldwide this morning and investors are lapping it all up," said Betty Lam, a sales trader at CMC Markets in Sydney. "Investors have taken the opportunity to buy back in with surprisingly strong momentum for what was conclusively not such great news for the U.S. economy."

Gains in markets across Asia added to the overnight reaction on Wall Street where the Dow Jones Industrial Average ended at a record high and Treasurys posted their biggest one-day price rally since November 2011. The Fed's continued support of economic growth also buoyed commodity prices, sending oil and gold in particular higher.

The S&P/ASX 200 climbed 1.1% to 5295.5, the highest close for the benchmark index in more than five years although shy of the 5300.1 level touched during the day. Gains were broad based, led by the mining and energy sectors.

Shane Oliver, head of investment strategy at AMP Capital, said the Fed's quantitative easing is set to continue providing a boost to shares going into next year even through it is likely to begin tapering its stimulus some time in the next six months.

"Underperforming cyclical stocks, such as resources, may ultimately be more attractive as they offer better value and will benefit as the global and Australian economies pick up," Mr. Oliver said.

The Australian currency surged to its highest level in three months as the U.S. dollar fell on the Fed's decision to maintain its stimulus. Sustained gains in the local currency could put pressure on the Reserve Bank of Australia, which has already expressed concerns about the currency's dampening effect on economic growth, and would heighten the odds of further rate cuts.

BHP Billiton helped lead a charge by mining shares, closing up 1.6% while rival Rio Tinto climbed 3.1% and iron-ore producer Fortescue Metals gained 2.5%.

The rise in the price of gold supported miners of the metal, with Newcrest Mining up 7.9% and smaller Alacer Gold and Kingsgate up 17% and 16% respectively.

Banks were also higher, with ANZ, National Australia Bank and Westpac up between 1.1% and 1.9%.

Billabong rose 5.6% after the struggling surfwear retailer accepted a rival funding package from investors Centerbridge Partners and Oaktree Capital Management.

"Continued market momentum will be dependent on flash manufacturing readings out of China early next week. An additional recovery story for the world's second-largest economy could potentially see maintained market interest," CMC's Ms. Lam said.

Write to Robb M. Stewart at robb.stewart@wsj.com

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