Global stocks fight back after plunge
- 10th October 2008
WORLD stock markets mostly have rebounded, with London, Paris and Hong Kong rallying three per cent following a 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, a day after central banks in the United States, Britain, 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 per cent at about 1945 AEDT on Thursday. It had shed 5.18 per cent in turbulent dealings on Wednesday as "knee-jerk euphoria gave way to nagging doubt" over whether the interest-rate loosening was enough, added Bennett.
In morning deals, Paris rallied 3.06 per cent after tumbling 6.39 per cent on Wednesay. Frankfurt rose 2.32 per cent after a plunge of 5.88 per cent.
Elsewhere, Russia's main stock markets rebounded more than 11 per cent.
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, before ending down 0.5 per cent, a day after falling more than nine per cent - the biggest plunge in two decades.
Hong Kong rallied 3.3 per cent, Shanghai firmed 0.6 per cent and Singapore added 2.09 per cent. Sydney slipped 1.5 per cent and Taipei ended down 1.45 per cent.
"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 bankruptcy, said it had taken control of the country's biggest bank Kaupthing, while overnight the US Federal Reserve pumped another $US38 billion ($A57 billion) 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 take on the financial crisis and prevent a global recession. 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 per cent.
In an effort to keep credit flowing, the Bank of Japan injected Y4 trillion ($A60 billion) into the money markets, 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 overnight, the Dow Jones Industrial Average dropped 2.0 per cent, ending in the red for a sixth consecutive session. The Dow has fallen more than 30 per cent 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 per cent 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 per cent plunge prompted the bourse to take drastic counter-measures.
- © AAP
