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Global
stock markets rebounded yesterday after the US central bank,
the Federal Reserve, slashed interest rates in an attempt
to pull the world’s biggest economy away from a recession.
The UK’s FTSE 100 index closed 2.9 per cent higher
after falling more than three per cent earlier. France’s
Cac also bounced back but Germany’s Dax closed 0.3
per cent down.
In the US, the Dow Jones and S&P 500 indices were still
down, but not as sharply as when they had first opened.
The Fed cut its main interest rate to 3.5 per cent from
4.25 per cent in a surprise move.
It came after global markets had had their worst day since
9/11 on Monday, and as investors continued to dump shares
in early trading yesterday.
The fears about slowing global growth were so pronounced
that they spread to other asset classes, hurting commodities
such as gold and oil.
“This
major move might seem like a panic response to the plunge
in stock prices, but it also makes sense,” said Dick
Green at Briefing.com.
“The
markets are in a panic, and the Fed needed to respond in
kind.”
Caution rules
The recent stock market declines came after many investors
were disappointed by US President George W Bush’s proposed
US$145 billion emergency stimulus plan to boost the economy.
At the same time, banks were reporting increasing losses
stemming from problems in the US housing market, and some
of the main bellwether companies were not meeting analysts’
earnings estimates.
Signs of the tougher economic environment have also been
evident in the Christmas corporate trading statements and
economic data on both sides of the Atlantic.
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