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Text by AFP

Latest update : 2008-10-29

European shares were jubilant Wednesday, amid hopes of further rate cuts. In Paris, the CAC 40 closed up 9.2%, while London's main index jumped 8%. However, the DAX shed 0.45% in Frankfurt, dragged down by Volkswagen.

Global stock markets posted solid gains Wednesday, with investors buoyed by prospects for global interest rate cuts to help the world economy resist a slide into recession.
   
The US Federal Reserve was later Wednesday expected to slash US borrowing costs to boost the flagging US economy, with the European Central Bank likely to follow suit next week.
   
Following a strong showing in Asia and a robust performance in Europe, Wall Street overcame early weakness, with the Dow Jones Industrial Average up 1.07 percent at 9,162.45 points at mid-day.
   
Wall Street saw a huge bargain-hunting rally on Tuesday after days of savage sell-offs.
   
Analysts said the market had been overdue for a rally after big losses stemming from the worst financial turmoil since the 1930s Great Depression, with investors hoping the Fed will announce an aggressive rate cut at the end of a two-day policy meeting.
   
"Yesterday’s explosive rally increases the odds that the current bear market low was made on October 10," said Ed Yardeni at Yardeni Research.
   
Most analysts expect the Fed to cut its key federal funds rate by at least a half point, to 1.0 percent, matching the lows of 2003.
   
Some predicted the US central bank, which led a coordinated global rate cut earlier this month, could go even lower in an effort to jump-start lending and ease the global credit crunch.
   
"Since most traders think the half percentage point cut is already in the market, a higher or lower cut could drive market reaction," said Fred Dickson, analyst at DA Davidson & Co.
   
Markets in Europe soared, with several jumping 9.0 percent as spirits lifted and recession fears faded.
   
In London, the FTSE 100 index rose 8.05 percent to 4,242.54 points while in Paris the CAC gained 9.23 percent to 3,402.57 points.
   
By contrast, the Frankfurt DAX fell 0.31 percent to 4,808.69, dragged down by Volkswagen. VW shares surged on Monday and Tuesday on news that Porsche had boosted its stake in Europe's largest auto manufacturer.
   
Shares rose 9.42 percent in Madrid, 9.87 percent in Milan, 9.09 percent in Amsterdam, 6.56 percent in Brussels and 6.18 percent on the Swiss Market Index.
   
Heavyweight bank stocks were among the day's big winners.
   
Shares in Spanish lender Santander, the eurozone's largest bank by market capitalization, soared 14.33 percent.
   
Swiss banking giants UBS and Credit Suisse rose 15.2 percent and 11.40 percent respectively.
   
Sentiment in Milan was underpinned by a renewed pledge from Italian Prime Minister Silvio Berlusconi that the government stood ready to shore up the Italian banks if they sought such backing.
   
He said if banks requested it, the government was prepared to intervene through bonds, convertible bonds or a special class of shares "without punitive conditions for management or shareholders."
   
"Talk of rate cuts is boosting sentiment, with many expecting a cut of at least 50 basis points that would take interest rates in the United States down to 1.0 (percent)," said CMC Markets dealer Ian Griffiths.
   
"However, many are still sceptical after such huge moves ... there is no doubt that all eyes will be on the (Fed) ... and anything less than the expected 50 basis point rate cut could plunge these markets back to were they started (Tuesday)."
   
NAB Capital analyst John Kyriakopoulos also pointed to a "thawing" credit freeze that he said had overshadowed gloomy macroeconomic reports, notably sharp declines in US and French consumer confidence.
   
"It appears that expectations for imminent interest rate cuts by the major central banks and some signs that the credit freeze is thawing overwhelmed more bad news on economic growth.
   
"Central banks around the world are now taking more decisive monetary policy action to cushion the slump in economic activity," he said.
   
Earlier Wednesday, Tokyo shares rocketed 7.74 percent as the expected US rate reduction and hopes of a similar move in Japan lifted Asian markets.
   
Sydney rose 1.3 percent, Mumbai was up 0.4 percent and Hong Kong finished 0.8 percent higher.
   
The Nikkei business daily said Wednesday that Japan's central bank was considering cutting its already super-low interest rates by 25 basis points to 0.25 percent on Friday -- the first such move since March 2001.
   
Analysts said a rate cut in Japan now seemed likely and markets would be disappointed if the BoJ does not act.

Date created : 2008-10-29

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