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Rate cuts fail to cheer markets Rate cuts fail to cheer markets
(about 2 hours later)
Stocks have fallen sharply after co-ordinated interest rate cuts by major central banks failed to dispel the gloom engulfing world markets.Stocks have fallen sharply after co-ordinated interest rate cuts by major central banks failed to dispel the gloom engulfing world markets.
On Wall Street, the Dow Jones was down 1.5% at 9,303.1 points despite having risen in earlier trade. On Wall Street, the Dow Jones was down 2.1% at 9,248.7 points despite having risen in earlier trade.
European stock markets remained in negative territory, with London's FTSE 100 down 5.2%, France's Cac 40 5.7% lower and Germany's Dax down 5%. European stock markets ended deep in negative territory, with London's FTSE 100 down 5.18%, France's Cac 40 6.3% lower and Germany's Dax losing 5.9%.
Investors were unconvinced that the move would prevent a recession. Investors were unconvinced that the move would solve the financial crisis.
The Bank of England, the European Central Bank (ECB) and the US Federal Reserve have all reduced their key rates by half a percentage point.The Bank of England, the European Central Bank (ECB) and the US Federal Reserve have all reduced their key rates by half a percentage point.
DOW JONES INDUSTRIAL AVERAGE: 8 October 2008*All Times GMTDOW JONES INDUSTRIAL AVERAGE: 8 October 2008*All Times GMT
The Bank of England cut UK rates from 5% to 4.5%, the Federal Reserve reduced US rates from 2% to 1.5%, and the ECB cut eurozone rates from 4.25% to 3.75%.The Bank of England cut UK rates from 5% to 4.5%, the Federal Reserve reduced US rates from 2% to 1.5%, and the ECB cut eurozone rates from 4.25% to 3.75%.
"We are not out of the woods yet," said Joshua Raymond, market strategist City Index ."We are not out of the woods yet," said Joshua Raymond, market strategist City Index .
"We will have to see whether this has any long lasting effect on confidence.""We will have to see whether this has any long lasting effect on confidence."
The key now is for the markets to respond to this intervention with reason and a measure of realistic Stephen Gifford, Grant Thornton Financial crisis at-a-glance: 8 OctSouth Asian shares fallHuge sell-off on Arab exchanges We have not yet turned the corner in this financial crisis Capital Economics Financial crisis at-a-glance: 8 OctSouth Asian shares fallHuge sell-off on Arab exchanges
The falls on European and Asian stock markets had followed a huge sell-off on Wall Street on Tuesday, which saw the Dow Jones index close down more than 500 points.The falls on European and Asian stock markets had followed a huge sell-off on Wall Street on Tuesday, which saw the Dow Jones index close down more than 500 points.
Other key developments on another day of market turbulence have included:
  • The UK government has announced details of a rescue package that will see it put up to £50bn ($88bn) into banks to strengthen the financial system
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  • ING Direct announced it was acquiring more than £3bn of deposits held by British savers with Icelandic-owned banks
  • The British government said all UK savers with accounts in the closed Icelandic internet bank Icesave would get all their money back.
  • Austria became the latest country to fully guarantee savers' deposits
Other key developments on another day of market turbulence have included:
  • The UK government has announced a package of measures aimed at rescuing the banking system that makes available £400bn ($692bn) of fresh money
  • The British government said all UK savers with accounts in the closed Icelandic internet bank Icesave would get all their money back
  • ING Direct announced it was acquiring more than £3bn of deposits held by British savers with Icelandic-owned banks Kaupthing Edge and Heritable Bank
  • Austria and Hungary became the latest countries to fully guarantee savers' deposits
'Realistic optimism' 'Thumbs down'
The other central banks that took part in the co-ordinated rate cut were those in Canada, Sweden, and Switzerland. China also cut its interest rates, the second time it has cut its key rate in less than a month. The other central banks that took part in the co-ordinated rate cut were those in Canada, Sweden, and Switzerland. China also reduced its interest rates, the second time it has cut its key rate in less than a month.
FTSE 100 INDEX: 8 October 2008 FTSE 100 INDEX: 8 October 2008*All Times GMT
"The key now is for the markets to respond to this intervention with reason and a measure of realistic optimism," said Stephen Gifford, chief economist at Grant Thornton. "The co-ordinated interest rate cuts got the 'thumbs down' from equity markets, suggesting we have not yet turned the corner in this financial crisis," said analysts at Capital Economics.
Earlier in Asia, Japan's Nikkei had closed down 9.4% at 9,203, its lowest finish since June 2003.Earlier in Asia, Japan's Nikkei had closed down 9.4% at 9,203, its lowest finish since June 2003.
Hong Kong's Hang Seng index closed 6.2% lower. India's main index fell 8% at one point but eventually closed down 4.3%.Hong Kong's Hang Seng index closed 6.2% lower. India's main index fell 8% at one point but eventually closed down 4.3%.
Markets in Australia, China and Taiwan were among other fallers.Markets in Australia, China and Taiwan were among other fallers.
Russia's Micex exchange has suspended trading until Friday, after the index dropped more than 14% in the first half-hour of trading.Russia's Micex exchange has suspended trading until Friday, after the index dropped more than 14% in the first half-hour of trading.
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