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US markets join global recovery US markets join global recovery
(40 minutes later)
Global stock markets have recovered some ground from last week's sharp falls, after central banks moved to ease fears of a world credit crisis.Global stock markets have recovered some ground from last week's sharp falls, after central banks moved to ease fears of a world credit crisis.
US markets opened up on Monday, echoing European gains, as the Federal Reserve said it had put an extra $2bn (£994m; 1.5bn euros) into the banking system.US markets opened up on Monday, echoing European gains, as the Federal Reserve said it had put an extra $2bn (£994m; 1.5bn euros) into the banking system.
The European Central Bank earlier said it was giving a further 48bn euros.The European Central Bank earlier said it was giving a further 48bn euros.
By 1535 BST, the Dow Jones index was up 0.5% to 13,307.5, while the Nasdaq added 0.8% to 2,564.2 points. By 1750 BST, the Dow Jones index was up 0.4% to 13,294.6, while the Nasdaq had added 0.4% to 2,553.2 points.
In Europe, London's FTSE 100 rose 2.6%, France's Cac-40 was 2.2% ahead and Germany's Dax rose 1.5%. Earlier, Asian markets posted modest rises. In Europe, London's FTSE 100 closed 2.3% up at 6,237.8, France's Cac-40 ended was 2.2% ahead and Germany's Dax rose 1.8%. Earlier, Asian markets posted modest rises.
Investors also reacted well to official figures showing a stronger-than-expected rise in July's retail sales.Investors also reacted well to official figures showing a stronger-than-expected rise in July's retail sales.
As a result of the calm on the markets, oil prices also gained with US light, sweet crude rose $1.64 to $73.11 a barrel in New York trade, while in London Brent crude meanwhile climbed $1.42 to $71.81.As a result of the calm on the markets, oil prices also gained with US light, sweet crude rose $1.64 to $73.11 a barrel in New York trade, while in London Brent crude meanwhile climbed $1.42 to $71.81.
Sub-prime woesSub-prime woes
Recent financial market volatility has been triggered by the US sub-prime mortgage sector, which offers higher-risk loans to people with a poor credit history.Recent financial market volatility has been triggered by the US sub-prime mortgage sector, which offers higher-risk loans to people with a poor credit history.
Is Europe's central bank bailing out hedge funds unnecessarily? Robert Peston, BBC Business Editor Robert Peston's blog Q&A: Sub-prime lendingIs Europe's central bank bailing out hedge funds unnecessarily? Robert Peston, BBC Business Editor Robert Peston's blog Q&A: Sub-prime lending
As US interest rates have risen and the housing bubble has burst, a growing number of sub-prime lenders have defaulted on their loans prompting extensive financial difficulties for a number of investment funds with heavy exposure to the sector - and triggering fears of a wider financial crisis.As US interest rates have risen and the housing bubble has burst, a growing number of sub-prime lenders have defaulted on their loans prompting extensive financial difficulties for a number of investment funds with heavy exposure to the sector - and triggering fears of a wider financial crisis.
While some estimates say $300bn in loans could be at risk, one of the biggest worries for investors is not knowing the eventual scale of the problem.While some estimates say $300bn in loans could be at risk, one of the biggest worries for investors is not knowing the eventual scale of the problem.
"The big question is what is the overall amount [of loans at risk], and this is bad for the markets because if there is one thing that the markets hate, it is uncertainty," said Gilles Moec, senior economist at Bank of America."The big question is what is the overall amount [of loans at risk], and this is bad for the markets because if there is one thing that the markets hate, it is uncertainty," said Gilles Moec, senior economist at Bank of America.
Over the weekend several banks began putting a figure on their bad debts, including German state bank WestLB which said it had 1.25bn euros in total exposure to the US sub-prime sector.Over the weekend several banks began putting a figure on their bad debts, including German state bank WestLB which said it had 1.25bn euros in total exposure to the US sub-prime sector.
Banking movesBanking moves
To try to ease fears over available credit, several central banks have intervened by injecting money into the banking sector.To try to ease fears over available credit, several central banks have intervened by injecting money into the banking sector.
The European Central Bank (ECB) was the first - releasing 95bn euros on Thursday. It has since put in another 109 euros.The European Central Bank (ECB) was the first - releasing 95bn euros on Thursday. It has since put in another 109 euros.
Japan's central bank put one trillion yen ($8.5bn; £4.2bn) into the financial system last week and 600bn yen on Monday.Japan's central bank put one trillion yen ($8.5bn; £4.2bn) into the financial system last week and 600bn yen on Monday.
Most importantly, the Fed intervened twice on Friday, pumping $38bn into the system, before Monday's extra contribution.Most importantly, the Fed intervened twice on Friday, pumping $38bn into the system, before Monday's extra contribution.
But while some said it made sense, other feared it only made markets more nervous.But while some said it made sense, other feared it only made markets more nervous.
"The ECB was correct to shore up banks' balance sheets by providing more liquidity," said Peter Morici, professor at the University of Maryland School of Business."The ECB was correct to shore up banks' balance sheets by providing more liquidity," said Peter Morici, professor at the University of Maryland School of Business.
"But its high-profile tender offer did more to scare markets than calm them.""But its high-profile tender offer did more to scare markets than calm them."
Other analysts said it did not solve the underlying weakness in the US mortgage sector.Other analysts said it did not solve the underlying weakness in the US mortgage sector.
"It's certainly very reassuring that central banks are providing liquidity, but that doesn't repair or make go away any losses funds have experienced from the sub-prime sector," said Guy Hutchings, of MFS Investment Management."It's certainly very reassuring that central banks are providing liquidity, but that doesn't repair or make go away any losses funds have experienced from the sub-prime sector," said Guy Hutchings, of MFS Investment Management.