The focus in financial markets switched away from equities this week and on to government bonds, commodities and the dollar as fears over inflation replaced worries about deflation after bold moves by the Federal Reserve to revive the flagging US economy.

The US central bank stunned the markets as it announced it would buy $300bn of longer-term Treasuries over the next six months as part of a huge expansion of its balance sheet – joining the Bank of England, the Bank of Japan and the Swiss National Bank in pursuing a form of quantitative easing.