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Wall Street makes cautious start Wall Street shares decline again
(30 minutes later)
US stocks have made a mixed start to trade on Thursday, with the main indexes broadly flat. US stocks were lower in early afternoon trading, as investor jitters remain, despite the Federal Reserve injecting extra funds into the financial system.
After rising in the first few minutes of trade, the Dow Jones index fell back to stand up 17.7 points at 13,254 while the Nasdaq was down 7.74 at 2,545. After the Fed placed an extra $17.25bn (£8.6bn) to ease continuing fears of a credit squeeze, the Dow Jones index was down 54 points to 13,182.
The flat start in the US trimmed gains that had been seen on European markets. The Nasdaq had also lost ground, falling 22 points to 2,531.
In early afternoon trade in Europe, Germany's Dax index was up 0.5%, France's Cac 40 was 0.3% higher while London's FTSE 100 was barely changed. Continuing market turbulence and credit woes have been sparked by crisis in the US sub-prime mortgage sector.
Continuing fears
Despite the falls on the Dow Jones and Nasdaq, the main European share indexes closed up on Thursday.
London's FTSE advanced one point to 6,197, while Frankfurt's Dax added 11 points to 7,512.
Earlier, Japan's benchmark Nikkei index had closed up 2.6%, while China's main stock index hit another record high.Earlier, Japan's benchmark Nikkei index had closed up 2.6%, while China's main stock index hit another record high.
After several days of gains, analysts have begun to hope that the worst of the recent market turmoil may be over. After several days of gains, analysts had begun to hope that the worst of the recent market turmoil may be over.
Yet Tony Russell, senior equities adviser at ABN AMRO Morgans, cautioned that volatility is likely to continue for some time.Yet Tony Russell, senior equities adviser at ABN AMRO Morgans, cautioned that volatility is likely to continue for some time.
"The market is getting more comfortable...but confidence can certainly be shattered by any more revelations," he said."The market is getting more comfortable...but confidence can certainly be shattered by any more revelations," he said.
Promising signs? Record mortgage defaults
The recent market turmoil was triggered by problems in the US mortgage market, and especially in the so-called sub-prime sector that makes loans to people with poor credit history.The recent market turmoil was triggered by problems in the US mortgage market, and especially in the so-called sub-prime sector that makes loans to people with poor credit history.
Sub-prime default levels rose following higher interest rates in the US, raising fears that this could hamper credit availability in the broader market, beyond the home loan sector. Sub-prime default levels have risen to record highs over the past year in the face of higher US mortgage rates, raising fears that this could hamper credit availability in the broader market, beyond the home loan sector.
However, news on Wednesday that Bank of America plans to invest $2bn in one of the sub-prime market leaders, struggling US mortgage firm Countrywide Financial, was hailed as a promising sign. The Fed has now injected $120.5bn of emergency funds into the financial market over the last two weeks, while the European Central Bank and Bank of Japan have made similar moves.
On Wednesday investor confidence was cheered by the promising news that Bank of America plans to invest $2bn in one of the sub-prime market leaders, struggling US mortgage firm Countrywide Financial.
"The fact that M&A [mergers and acquisitions] activity resurfaced in the US market means liquidity may have started to come back," said Masayoshi Yano, senior manager of investment information at Tokai Tokyo Securities."The fact that M&A [mergers and acquisitions] activity resurfaced in the US market means liquidity may have started to come back," said Masayoshi Yano, senior manager of investment information at Tokai Tokyo Securities.