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Central bank moves cheer markets Central banks move to calm nerves
(9 minutes later)
Markets regained some poise in Thursday trading, cheered by news that six of the world's top central banks have taken steps to calm credit markets. Six of the world's top central banks have taken steps to calm worried stock markets, releasing $180bn (£99bn) to lift the amount of credit available.
The banks will release $180bn (£99bn) to lift the amount of credit available. Global stocks were volatile on Thursday as investors digested the Lloyds TSB's takeover of HBOS and the collapse of investment bank Lehman Brothers.
US stocks opened higher, echoing gains in Europe. Lloyds TSB's takeover of UK lender HBOS also dispelled some of the gloom hanging over the financial world. US indexes edged up while the view in Europe was mixed.
But markets are expected to stay volatile on fears that more firms could succumb to the financial crisis. However, continuing uncertainty has led to concern that other leading banking firms could be vulnerable.
The main Dow Jones index was up 1.34%, or 142.2 points, at 10,751.8, in early exchanges in New York. Shares in Morgan Stanley fell 21%, while Goldman Sachs, the largest remaining independent investment bank declined 13%.
President George W. Bush said he was closely monitoring the situation on financial markets and the recent actions taken by the Federal Reserve and other regulators were "necessary and important". Analysts fear the banks may not be able to stand alone as independent firms.
"We will continue to act to strengthen and stabilise our financial markets and improve investor confidence," he said. Bush concern
The past few days have seen a number of dramatic developments on financial markets. Thursday's key events include:
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  • Central banks from UK, US, Europe, Canada, Switzerland and Japan will release the $180bn into their money markets. The move is the fourth such concerted effort since the onset of the credit crisis last year.
  • The news helped to reduce the interest rate at which banks lend to each other - a key factor behind the problems in credit markets.
  • Cautious investors are looking for safer places to put their money. The price of gold, regarded as a haven in troubled times, rose to $871.2 an ounce after recording its biggest one-day gain in history on Wednesday.
  • Lloyds TSB released details of its £12.2bn takeover of HBOS. The deals values HBOS shares at 232p each, is expected to lead to cost savings of £1bn a year and could also result in significant job losses.
  • Russia's main stock exchange suspended trading for a second consecutive day as the government tried to halt a sharp fall in share prices and restore confidence in the economy.
  • The UK's Financial Services Authority has announced steps to restrict short-selling of shares
On the markets, the Paris Cac shed 1.06% to end at 3957.86 and London's FTSE 100 ended 0.6% lower at 4880. In Frankfurt, the Dax closed 0.04% up, at 5863.42.
Bush seeks to reassure marketsBush seeks to reassure markets
President George W Bush said he was closely monitoring the situation on financial markets and the recent actions taken by the Federal Reserve and other regulators were "necessary and important".
"We will continue to act to strengthen and stabilise our financial markets and improve investor confidence," he said.
The past few days have seen a number of dramatic developments on financial markets. Thursday's key events include:
  • Central banks from UK, US, Europe, Canada, Switzerland and Japan are releasing $180bn into their money markets. The move is the fourth such concerted effort since the onset of the credit crisis last year.
  • The news helped to reduce the interest rate at which banks lend to each other - a key factor behind the problems in credit markets.
  • Cautious investors are looking for safer places to put their money. The price of gold, regarded as a haven in troubled times, rose to $871.2 an ounce after recording its biggest one-day gain in history on Wednesday.
  • Lloyds TSB released details of its £12.2bn takeover of HBOS. The deals values HBOS shares at 232p each, is expected to lead to cost savings of £1bn a year and could also result in significant job losses.
  • Russia's main stock exchange suspended trading for a second consecutive day as the government tried to halt a sharp fall in share prices and restore confidence in the economy.
  • The UK's Financial Services Authority has announced steps to restrict short-selling of shares
Banks take actionBanks take action
The action taken by the central banks helped to boost confidence on European stock markets although analysts doubted it would have a long-term impact.The action taken by the central banks helped to boost confidence on European stock markets although analysts doubted it would have a long-term impact.
The credit crunch is creating a new world order in banking and finance Robert Peston, BBC business editor Read Robert's blogCentral banks release more fundsThe credit crunch is creating a new world order in banking and finance Robert Peston, BBC business editor Read Robert's blogCentral banks release more funds
"Markets know that central banks don't own a magic bullet, otherwise they would have used it already," Sean Callow, currency strategist at investment firm Westpac."Markets know that central banks don't own a magic bullet, otherwise they would have used it already," Sean Callow, currency strategist at investment firm Westpac.
"And we've seen these sorts of steps before; it only addresses one of the symptoms of the underlying crisis.""And we've seen these sorts of steps before; it only addresses one of the symptoms of the underlying crisis."
In early afternoon trading, the FTSE 100 index was up 36 points, or 0.74%, at 4,948.7. Germany's Dax index was up 0.8% and France's Cac 40 was up 1.23%.
In Asia, Hong Kong ended flat at 17,632.5 after earlier falling by 7% as fears of more company failures gripped investors.In Asia, Hong Kong ended flat at 17,632.5 after earlier falling by 7% as fears of more company failures gripped investors.
Tokyo's Nikkei share index ended 2% lower. Share indexes in Shanghai, Taiwan and India fell by between 3 and 5%.Tokyo's Nikkei share index ended 2% lower. Share indexes in Shanghai, Taiwan and India fell by between 3 and 5%.
On Wednesday, the Dow Jones index of leading US stocks fell by more than 4%.On Wednesday, the Dow Jones index of leading US stocks fell by more than 4%.
Market turmoilMarket turmoil
Markets have been on a white-knuckle ride this week, with the collapse of 150-year old investment bank Lehman Brothers quickly followed by a government rescue of US insurance giant AIG.Markets have been on a white-knuckle ride this week, with the collapse of 150-year old investment bank Lehman Brothers quickly followed by a government rescue of US insurance giant AIG.
Another investment bank, Merrill Lynch, has been taken over by Bank of America.Another investment bank, Merrill Lynch, has been taken over by Bank of America.
There has also been feverish speculation about the future of two other leading US banks - Morgan Stanley and Washington Mutual. There has also been feverish speculation about the future of two other leading US investment banks - Morgan Stanley and Goldman Sachs. There is also uncertainty surrounding the future of Washington Mutual.
In early US trade, Morgan Stanley's shares were down 0.83% at $21.57. Washington Mutual shot up 19.4% to $2.40.
The BBC's business editor Robert Peston said that even Goldman Sachs, the pre-eminent investment bank cannot be confident it can thrive and survive as an independent.The BBC's business editor Robert Peston said that even Goldman Sachs, the pre-eminent investment bank cannot be confident it can thrive and survive as an independent.
"The credit crunch is creating a new world order in banking and finance," he said."The credit crunch is creating a new world order in banking and finance," he said.