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Shares rise on US rate cut hopes US shares mixed before rate vote
(about 9 hours later)
European and Asian shares have risen on growing expectations that the US Federal Reserve will announce a further cut in interest rates. US stocks were mixed in early Tuesday trading on Wall Street as expectations of a cut in interest rates were offset by weaker consumer confidence data.
As the US central bank prepares for its latest rate vote on Wednesday, the UK's FTSE index was up 54 points or 0.9% to 5,843 in lunchtime trading in London. While the main Dow Jones index was up 25 points to 12,409, the Nasdaq had slipped 13 points to 2,337.
Germany's Dax was 1% higher, while Japan's Nikkei earlier closed up 3%. Although investors are confident the US Federal Reserve will cut rates to 3.25% or even 3% on Wednesday, figures showed consumer sentiment fell in January.
The Fed is tipped to cut US rates to 3.25% or even 3% from the current 3.5%, as it moves to ease recession fears. In Europe, the UK's FTSE was up 0.9%, while Germany's Dax had added 0.75%.
Last week, it reduced rates to 3.5% from 4.25% in an emergency move after global stocks fell heavily. Japan's Nikkei had earlier closed up 3%.
Sustainable gains? Weak data
However, some analysts warned that while global investors were currently being cheered by the expected cut in US interest rates, further weak American economic data could bring shares back down again. Last week, the Fed cut US interest rates to 3.5% from 4.25% in an unscheduled emergency move.
Markets look likely to extend a roller-coaster ride, at least in the first half of 2008 when more dismal news about the US economy is expected to be released Lee Kyung-soo, an analyst at Daewoo SecuritiesMarkets look likely to extend a roller-coaster ride, at least in the first half of 2008 when more dismal news about the US economy is expected to be released Lee Kyung-soo, an analyst at Daewoo Securities
Following record-low US new home sales figures released on Monday, the latest American consumer confidence data is released later on Tuesday. Analysts had already warned that further weak American economic data could bring shares back down again, despite the expected further US rate cut.
"Expectations for further US rate cuts are lifting markets, but whether the market could sustain the gains, it's up to a series of US economic data due soon," said Lee Kyung-soo, an analyst at Daewoo Securities."Expectations for further US rate cuts are lifting markets, but whether the market could sustain the gains, it's up to a series of US economic data due soon," said Lee Kyung-soo, an analyst at Daewoo Securities.
"Markets look likely to extend a roller-coaster ride, at least in the first half of 2008 when more dismal news about the US economy is expected to be released.""Markets look likely to extend a roller-coaster ride, at least in the first half of 2008 when more dismal news about the US economy is expected to be released."
Wall Street's main Dow Jones index closed Monday trading up 1.45% or 177 points.Wall Street's main Dow Jones index closed Monday trading up 1.45% or 177 points.