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US stocks fall as elsewhere rises US stocks rise but jitters remain
(about 3 hours later)
US stocks have fallen in afternoon trade - reversing earlier gains, amid ongoing fears over market volatility. US stocks have ended mainly higher, but concerns remain that a rise in bad debt could cause a wider financial crisis.
The Dow Jones industrial average dropped 0.65%, to 12,993.81. The Dow Jones industrial average rose 0.32%, to end the day at 13,120.29, while the Nasdaq added 0.14%. But the Standard & Poor's 500 index fell 0.03%.
But European shares closed higher, led by mining and metals companies. France's Cac-40 closed 0.67% up and London's FTSE 100 rose 0.24%. European shares closed up, and London's FTSE 100 climbed 0.24%.
A surprise move by the US to cut a key bank lending rate on Friday had buoyed markets worldwide, but concerns over credit problems persisted in the US. Steps by central banks to calm the market, including the surprise US move to cut a key interest rate on Friday, have helped stocks recover some ground.
A rise in US home loan defaults has triggered fears of a wider financial crisis. The US Federal Reserve reduced the rate it applies to loans for banks by 0.5% to 5.75%
Shares in JP Morgan Chase fell 3% to $45.61 while Citigroup dropped 1.8% to $47.95 on the S&P 500 index. Brian Levitt, corporate economist at OppenheimerFunds said though the Fed's move had been helpful, it was not enough to eliminate all of the unease in the market.
"I think there was too much complacency coming into the market today," said Michael James, senior trader at regional investment bank Wedbush Morgan. The Federal Reserve is not scheduled to meet until 18 September. Some analysts argue that until then market jitters will remain.
On Friday the Fed cut the rate of overnight loans to banks to try to stall the recent spate of losses. "There's a lot of uncertainties out there," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners.
"The question is if the Fed did enough to satisfy the markets. Wall Street will be relentless until they cut the fed funds rate."
The recent turmoil has stemmed from a sharp rise in US home loan defaults, triggering fears of a wider financial crisis.
JP Morgan Chase was one of the main losers on Monday, ending 1.1% lower but clawing back from a 3% drop earlier in the day. Citigroup closed 0.8%, also recovering slightly from a 1.8% loss in earlier trading.
US Republican senator Richard Shelby, a former chairman of the US Senate's banking and housing committee, warned that the crisis would worsen before things improved.US Republican senator Richard Shelby, a former chairman of the US Senate's banking and housing committee, warned that the crisis would worsen before things improved.
Some firms would "not survive" the current volatility and some rates on certain sub-prime loans were set to increase, he said.Some firms would "not survive" the current volatility and some rates on certain sub-prime loans were set to increase, he said.
Housing slow-downHousing slow-down
The recent market volatility has been prompted by a wave of mortgage defaults in the US as the housing market slowed dramatically after a series of interest rate rises that have made paying back loans more expensive.The recent market volatility has been prompted by a wave of mortgage defaults in the US as the housing market slowed dramatically after a series of interest rate rises that have made paying back loans more expensive.
Earlier on Monday, US lender Thornburg Mortgage said it had sold $20.5bn of assets.Earlier on Monday, US lender Thornburg Mortgage said it had sold $20.5bn of assets.
The firm, which has been severely hit by credit problems, said it had offloaded billions of dollars worth of mortgage-backed securities in an attempt to better its financial position.The firm, which has been severely hit by credit problems, said it had offloaded billions of dollars worth of mortgage-backed securities in an attempt to better its financial position.
Financial shares have been hard hit due to the huge liabilities of banks and other financial firms linked to the unstable sub-prime mortgage sector.Financial shares have been hard hit due to the huge liabilities of banks and other financial firms linked to the unstable sub-prime mortgage sector.
The sub-prime sector makes loans to high-risk individuals and charges them higher rates of interest.The sub-prime sector makes loans to high-risk individuals and charges them higher rates of interest.
The sector boomed when thousands of people took out loans during the housing boom that petered out in early 2006.The sector boomed when thousands of people took out loans during the housing boom that petered out in early 2006.
Worldwide stocks Asian stocks
Japan's Nikkei share index closed 3% up on Monday, while Hong Kong's Hang Seng index ended 5.6%.Japan's Nikkei share index closed 3% up on Monday, while Hong Kong's Hang Seng index ended 5.6%.
The Nikkei had seen its biggest one-day fall in nearly six years on Friday, and other Asian markets had also slumped. Last week the Nikkei saw its biggest one-day fall in nearly six years, and other Asian markets also slumped.
People still feel the market isn't really stable Kingston Lin, Prudential Brokerage.
At Monday's close, the Nikkei was at 15,732.48 points, up 458.80 points, or 3%, from Friday.At Monday's close, the Nikkei was at 15,732.48 points, up 458.80 points, or 3%, from Friday.
South Korean shares also surged ahead, with its Composite Stock Price Index closing up 5.7% at 1,731.27, its biggest percentage gain in more than five years, according to the Korea Exchange.South Korean shares also surged ahead, with its Composite Stock Price Index closing up 5.7% at 1,731.27, its biggest percentage gain in more than five years, according to the Korea Exchange.
Australian shares closed up 4.6% and Chinese stocks were ahead by 5.33%.Australian shares closed up 4.6% and Chinese stocks were ahead by 5.33%.
India's benchmark share index opened 2.6% higher, tracking other Asian markets.
The Reserve Bank of Australia injected $2.67bn into the banking system to ward off pressure on some short-term market interest rates.