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Market turmoil continues despite rates cut

Latest update : 2008-10-08

World stock values continued to fall despite interest rate cuts announced by central banks. Losses ranged from 5.18% in London to 8% in Vienna. The Dow Jones lost 2.21% and the Nasdaq fell by 0.81%.

World stock markets suffered another dizzying slide Wednesday, with losses in Europe topping 8.0 percent, as traumatized investors brushed aside central bank rate cuts aimed at boosting confidence.

After a calamitous day in Asia, Wall Street plunged at the open, rebounded slightly and then fell hard by mid-day.

Losses in Europe ranged from 5.18 percent in London to more than 8.0 percent in Vienna. Markets in Oslo and Stockholm were down more than 6.0 percent at the end of trade.

Major central banks launched an exceptional joint effort to battle the global financial crisis, simultaneously slashing interest rates on three continents.

The US Federal Reserve, European Central Bank, Bank of England and peers in China, Canada, Sweden and Switzerland slashed key rates by a half percentage point, sending their strongest signal of support since just after the September 11, 2001 terror attacks in the US.

"We are not out of the woods yet," warned City Index market strategist Joshua Raymond. "We will have to see whether this has any long lasting effect on confidence."

"What is good to see is the central banks making a co-ordinated and proactive effort to combat what is now a global economic problem. The fear is that this should have come about a week ago."

Analysts at Bank Wegelin in Switzerland said "there is panic in all corners and suspicion in all its forms."

In New York the Dow Jones Industrial Average was down 2.04 percent at 9,254.76 at mid-day while the tech-heavy Nasdaq composite had shed 0.65 percent to reach 1,743.44.

"The big question now is, will the buying interest be sustained or will it be seen as another opportunity to sell into strength, fueled by the thinking that the rate cut still isn't enough to change the market tone?" asked Patrick O'Hare, analyst at, when New York shares were in positive territory.

"Regardless of how today plays out, the rate cut is another supportive measure that raises the long-term appeal of equities at these depressed levels. That last point could get washed away in another fear-based trade today," he said.

"Ultimately, though, it should be held in trust by investors as a positive move for the economy and the capital markets."

Al Goldman at Wachovia Securities noted that confidence was the number-one problem in the market.

"This rate cut will not be an overnight cure-all but is a strong positive in the right direction," Goldman said.

"The good news is that the healing process has begun," he added.

But markets in Europe failed to get the message.

In London the FTSE 100 index of leading shares shed 5.18 percent in turbulent trade to finish at 4,366.69 points while in Paris the CAC 40 fell 6.39 percent to 3,493.70 points.

The Frankfurt DAX lost 5.88 percent to 5,013.62 points.

Elsewhere there were declines of 5.51 percent on the Swiss Market Index, 5.20 percent in Madrid, 5.71 percent in Milan, 7.36 percent in Brussels and 7.68 percent in Amsterdam.

Arab shares tumbled for the fourth day running but the Saudi bourse, the region's largest, rebounded after the international rate cut while the Egyptian market made up some ground.

Concerns mounted about the impact of the global financial crisis on the oil-rich Gulf, where the region's seven stock markets lost more than 30 billion dollars of capitalisation in the latest rout.

In other action Wednsday, the British government said it would use 50 billion pounds (64 billion euros, 87 billion dollars) of taxpayer money to buy preferential shares in banks.

The three-part package also makes available 200 billion pounds in short-term loans and the government will issue 250 billion pounds to guarantee loans between banks.

Britain's measures came after the United States last month announced its own 700-billion-dollar bailout of ailing Wall Street banks.

In Asia, Japanese Prime Minister Taro Aso said he was stupefied by the Tokyo market's slide, 9.38 percent, adding he sensed "huge fears" in the public.

Hong Kong ended down 8.2 percent at its lowest level in more than two years.

Trading was frozen on Russia's two main stock markets after plunges of more than 11 percent on opening.

"No one knows for certain now what they can rely on," said Hironobu Hagi, deputy general manager at capital market division of Shinsei Bank.

"We're seeing panic selling. Once players see a sign of selling, everybody tries to jump on the bandwagon," he said.

Global central banks meanwhile pumped billions of extra dollars into the financial system while the Hong Kong Monetary Authority said it would cut its key interest rate by 100 basis points from Thursday.

The US Federal Reserve said Tuesday it would buy up short-term commercial paper or company debt in an effort to kick-start credit flows and fight off the liquidity crunch triggered by a wave of US mortgage defaults.

Date created : 2008-10-08