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US rate cut boosts global markets | US rate cut boosts global markets |
(10 minutes later) | |
UK shares swung firmly back into positive territory following the US Federal Reserve's move to cut the rate at which it lends to banks. | UK shares swung firmly back into positive territory following the US Federal Reserve's move to cut the rate at which it lends to banks. |
The decision, designed to increase the flow of money in the US financial system, saw London's FTSE 100 jump 3.5% or 205.3 points to 6,064.2. | The decision, designed to increase the flow of money in the US financial system, saw London's FTSE 100 jump 3.5% or 205.3 points to 6,064.2. |
Relief was also felt in Wall Street, where shares opened sharply higher, and elsewhere in Europe. | Relief was also felt in Wall Street, where shares opened sharply higher, and elsewhere in Europe. |
After an hour, the Dow Jones had fallen back and was up just 1.1% at 12,986.7. | After an hour, the Dow Jones had fallen back and was up just 1.1% at 12,986.7. |
The technology-based Nasdaq was up 1.1% at 2,478.1. | The technology-based Nasdaq was up 1.1% at 2,478.1. |
Tighter credit conditions and increased uncertainty have the potential to restrain economic growth US Federal Reserve Open Markets Committee Fed cuts rate to calm stocks | |
At the end of the day in Europe, Frankfurt's Dax was up 1.49%, while the Cac 40 in Paris closed 1.86% higher. | At the end of the day in Europe, Frankfurt's Dax was up 1.49%, while the Cac 40 in Paris closed 1.86% higher. |
All three main European indexes had veered in and out of the red throughout the day's trading. | All three main European indexes had veered in and out of the red throughout the day's trading. |
The Fed's rate cut is intended to help with the liquidity problems facing many banks following the US housing slump. | The Fed's rate cut is intended to help with the liquidity problems facing many banks following the US housing slump. |
On Thursday, London's FTSE 100 fell 4.1%, cutting almost £60bn off the value of Britain's top companies. | On Thursday, London's FTSE 100 fell 4.1%, cutting almost £60bn off the value of Britain's top companies. |
See long term trends among the major stock market indexes | |
Wait and see | Wait and see |
The recent worldwide slide in share prices was triggered by problems in the US mortgage market. | The recent worldwide slide in share prices was triggered by problems in the US mortgage market. |
The problems centre on the sub-prime sector, which offers higher-risk loans to people with a poor credit history. | The problems centre on the sub-prime sector, which offers higher-risk loans to people with a poor credit history. |
As US interest rates have risen and the housing bubble has burst, a growing number of sub-prime borrowers have defaulted on their loans. | As US interest rates have risen and the housing bubble has burst, a growing number of sub-prime borrowers have defaulted on their loans. |
Because the lenders have often sold on the debt, this has led to extensive financial difficulties for a number of investment funds with heavy exposure to the sector - prompting fears of a wider financial crisis. | Because the lenders have often sold on the debt, this has led to extensive financial difficulties for a number of investment funds with heavy exposure to the sector - prompting fears of a wider financial crisis. |
The worry for many investors is that stock market declines will resume next week, wiping even more money off the value of pension funds and global stock markets. | The worry for many investors is that stock market declines will resume next week, wiping even more money off the value of pension funds and global stock markets. |
Analysts said there was no guarantee that Friday's upward trend would be maintained when trading resumed after the weekend. | Analysts said there was no guarantee that Friday's upward trend would be maintained when trading resumed after the weekend. |
Asian losses | Asian losses |
The European share recovery followed big falls on Asian stock markets. | The European share recovery followed big falls on Asian stock markets. |
Japan's Nikkei declined 5.42%, its biggest points fall since April 2000, while Hong Kong's Hang Seng closed 1.38% lower. | Japan's Nikkei declined 5.42%, its biggest points fall since April 2000, while Hong Kong's Hang Seng closed 1.38% lower. |
The Bank of Japan injected 1.2 trillion yen ($10.7 billion; £5.4bn) into money markets, which was its third intervention of the week. | The Bank of Japan injected 1.2 trillion yen ($10.7 billion; £5.4bn) into money markets, which was its third intervention of the week. |
Japanese investors are worried that a slowdown in the US economy will hit exports from Asia. | Japanese investors are worried that a slowdown in the US economy will hit exports from Asia. |
There is also speculation that the Bank of Japan could raise interest rates next week, despite the problems on the market. | There is also speculation that the Bank of Japan could raise interest rates next week, despite the problems on the market. |
Elsewhere, the Australian central bank intervened to support its currency for the first time for six years. | Elsewhere, the Australian central bank intervened to support its currency for the first time for six years. |
The Australian dollar was facing its biggest one-day fall against the US dollar since it was allowed to trade freely in 1983. | The Australian dollar was facing its biggest one-day fall against the US dollar since it was allowed to trade freely in 1983. |
The dollar has benefited from the financial crisis as investors sort a safe haven. | The dollar has benefited from the financial crisis as investors sort a safe haven. |
MAJOR SHARE INDEXES OVER THE PAST YEAR | MAJOR SHARE INDEXES OVER THE PAST YEAR |
Return to top | Return to top |