Global stock markets rebound after rate cuts
Friday, 10 October 2008

AFP, LONDON - World stock markets mostly rebounded on Thursday, with London, Paris and Hong Kong rallying three percent following a fresh round of emergency interest rate cuts and after share prices had dived a day earlier.

Hong Kong, South Korea and Taiwan all reduced borrowing costs Thursday, a day after central banks in the United States, Canada, Europe and China slashed their key interest rates in a bid to tackle an escalating economic crisis.
"The market finally got the coordinated action it was crying out for, when most of the major central banks cut rates," said Calyon analyst Stuart Bennett.
London's FTSE 100 index of leading shares was up 3.08 percent at about 0845 GMT on Thursday. It had shed 5.18 percent in turbulent dealings Wednesday as "knee-jerk euphoria gave way to nagging doubt" over whether the interest-rate loosening was enough, added Bennett.
In morning deals Thursday, Paris rallied 3.06 percent after tumbling 6.39 percent on Wednesday. Frankfurt rose 2.32 percent after a plunge of 5.88 percent.
Elsewhere, Russia's main stock markets rebounded more than 11 percent.
Dealers said it was too soon to say the worst was over. Credit markets remained under severe stress, prompting the Bank of Japan to make its biggest one-day cash injection into the financial system since the crisis began.
The Tokyo market slipped in and out of positive territory on Thursday, before ending down 0.5 percent, a day after falling more than nine percent -- the biggest plunge since the stock market crash of October 1987
Hong Kong rallied 3.3 percent, Shanghai firmed 0.6 percent and Singapore added 2.09 percent. Sydney slipped 1.5 percent and Taipei ended down 1.45 percent.
"While rate cuts may not address the root cause of the problem, they do help the real economy and indirectly assist bank recapitalisation," said analysts at UBS.
"Officials need to act in unprecedented ways as fear itself seems to be the biggest fear."
Dealers said it was too early to say whether markets were over the worst of the recent turmoil unleashed by a US housing market meltdown, as policymakers scramble to prevent banks collapsing and stop stock markets plunging.
"The market is far from being stabilised completely," said Toshihiko Matsuno, research head at SMBC Friend Securities.
"Investors still remain unsure if Washington will move to inject public money" into ailing banks.
Iceland, battling national bankrutpcy, said Thursday it had taken control of the country's biggest bank Kaupthing, while overnight the US Federal Reserve pumped another 38 billion dollars into insurance giant AIG.
Iceland's government nationalised Kaupthing, completing a state takeover of the top three banks after Landsbanki and Glitnir were saved over the past week.
Meanwhile concerns lingered that central banks may have left little ammunition to prevent the worst global financial crisis since the Great Depression. Some analysts said the rate cuts should have been bigger.
Central banks "had to take the action after watching the chain reaction of the market plunges," said Daisuke Uno, chief market strategist at Sumitomo Mitsui Banking Corp. "But a half-point cut was such a stingy move."
Japan's central bank said it supported the rate cuts but was not participating as its own benchmark level was already low at 0.5 percent.
In an effort to keep credit flowing, the Bank of Japan injected 4.0 trillion yen (40 billion dollars) into the money markets on Thursday, the 17th straight business day it had pumped in cash. Other central banks continued their daily action of feeding markets with billions of dollars.
In New York on Wednesday, the Dow Jones Industrial Average dropped 2.0 percent, ending in the red for a sixth consecutive session. The Dow has fallen more than 30 percent in a year.
Investors fear that policymakers are running out of options to calm the turmoil unleashed by a US housing slump and related credit crunch.
There were growing fears that the financial crisis is taking a heavy toll on the major economies.
Japan's core machinery orders, a key gauge of corporate capital spending, slumped 14.5 percent in August from the previous month, the fastest drop in more than two years, adding to fears of a recession in Asia's biggest economy.
Trading remained suspended on the Indonesia Stock Exchange a day after a 10 percent plunge prompted the bourse to take drastic counter-measures.
- Dow Jones Newswires contributed to this story -

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