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| Version 1 | Version 2 |
|---|---|
| US stocks rally on rate cut hopes | US stocks rally on rate cut hopes |
| (about 1 hour later) | |
| US stocks have closed up strongly on Wall Street after comments from a Federal Reserve official boosted hopes of an interest rate cut next month. | |
| Banks and other financial stocks led the gains after Fed vice-chairman Donald Kohn said the central bank needed to be "flexible and pragmatic". | Banks and other financial stocks led the gains after Fed vice-chairman Donald Kohn said the central bank needed to be "flexible and pragmatic". |
| Mr Kohn said this was required as the recent credit market squeeze was worse than previously thought. | Mr Kohn said this was required as the recent credit market squeeze was worse than previously thought. |
| The main Dow Jones index ended up 2.6% or 332 points to 13,290. | |
| Taken together with the Dow's rise on Tuesday, it represents its biggest two-day gain in five years. | |
| Meanwhile, the Nasdaq index added 3.2% or 82 points to 2,663. | |
| The markets were further boosted by further falls in global oil prices. | |
| Sub-prime debt | Sub-prime debt |
| A further interest rate cut from the Fed would help ease the credit markets by making it cheaper for banks to lend and borrow money. | A further interest rate cut from the Fed would help ease the credit markets by making it cheaper for banks to lend and borrow money. |
| The Beige Book report indicates the economy is deteriorating, though not falling off a cliff Doug Roberts, Channel Capital Research | The Beige Book report indicates the economy is deteriorating, though not falling off a cliff Doug Roberts, Channel Capital Research |
| The Fed last lowered rates on 1 November, reducing them to 4.5% from 4.75%. | The Fed last lowered rates on 1 November, reducing them to 4.5% from 4.75%. |
| That followed after a bigger cut from 5.25% to 4.75% in October, the Fed's first reduction in rates in four years. | That followed after a bigger cut from 5.25% to 4.75% in October, the Fed's first reduction in rates in four years. |
| The credit crunch was sparked in late August by the revelation of billions of dollars worth of bad debt in the so-called sub-prime mortgage sector. | The credit crunch was sparked in late August by the revelation of billions of dollars worth of bad debt in the so-called sub-prime mortgage sector. |
| This bad debt came against the backdrop of higher US mortgage rates and a slump in the wider housing market. | This bad debt came against the backdrop of higher US mortgage rates and a slump in the wider housing market. |
| A further interest cut from the Fed next month would also give the US property market a much needed boost. | A further interest cut from the Fed next month would also give the US property market a much needed boost. |
| Lower economic growth | Lower economic growth |
| Mr Kohn's downbeat assessment was subsequently echoed by the Fed's latest Beige Book economic report. | Mr Kohn's downbeat assessment was subsequently echoed by the Fed's latest Beige Book economic report. |
| The weak housing market is hitting US economic growth | The weak housing market is hitting US economic growth |
| It said US economic growth slowed in October and the first half of November due to falling house prices and less available mortgages. | It said US economic growth slowed in October and the first half of November due to falling house prices and less available mortgages. |
| The report "indicates the economy is deteriorating, though not falling off a cliff", said Doug Roberts, chief investment strategist at Channel Capital Research. | The report "indicates the economy is deteriorating, though not falling off a cliff", said Doug Roberts, chief investment strategist at Channel Capital Research. |
| Last week the Fed cut its forecast for 2008 economic growth to a range of 1.8% to 2.5% - due to the tighter credit markets and weakness in housing. | Last week the Fed cut its forecast for 2008 economic growth to a range of 1.8% to 2.5% - due to the tighter credit markets and weakness in housing. |
| In July it had predicted growth of between 2.5% and 2.75% next year. | In July it had predicted growth of between 2.5% and 2.75% next year. |