Thursday December 4, 10:04 PM
Global stocks fail to get lift from rate cuts
NEW YORK (AFP) - Global stock markets failed to get a lift from dramatic interest rate cuts from central banks around the world, and Wall Street shares were hammered as rising job cuts and economic fears hit sentiment.
The Dow Jones Industrial Average tumbled 2.51 percent to 8,376.24 as investors stampeded toward the safety of US Treasury bonds after a series of big job-slashing announcements that highlighted the weak economic outlook.
The Nasdaq composite slid 3.14 percent to 1,445.56 and the broad-market Standard & Poor's 500 sank 2.92 percent to 845.22.
In Europe, the losses were modest as traders digested the impact of big rate cuts by the European Central Bank and Bank of England.
London's FTSE 100 index closed down 0.15 percent to 4,163.61, In Paris, the CAC 40 (Paris: news) fell 0.17 percent to 3,161.16 while the Frankfurt DAX lost 0.07 percent to 4,564.23.
As Wall Street opened, investors learned that telecommunications giant AT&T (NYSE: T - news) announced it was cutting 12,000 jobs and slashing capital spending due to the economic downturn.
Job cuts were also announced by media giant Viacom (NYSE: VIA-B - news) and chemical maker DuPont.
A government report showed a drop in the number of new unemployment claims in the past week, but the level remained high at 509,000.
The latest news is "pointing to the hardest landing, at least so far as employment is concerned, since the early 1980s," said TJ Marta, analyst at RBC Capital Markets.
Market action came as the Detroit automakers pleaded in Congress for emergency loans of 34 billion dollars to help them weather the storm.
But there was no clear sign of sufficient support among lawmakers, and analysts said bankruptcy was still possible.
"There's a high, high possibility of a bankruptcy by one of the (Big Three) automakers which still could take place even if they get some funding from the federal government in this round of discussions," said Gregg Stein of Standard & Poor's ratings agency.
Four European central banks announced steep cuts to their main interest rates on Thursday in a bid to stem a spreading recession and help businesses and consumers recover.
Analysts said the moves were welcome but were unlikely to quickly reverse recessionary pressures in the global economy or solve the problems of the financial sector.
"There can be little doubt that this will help the myriad of small- and medium-sized companies, mortgage holders and those that are too highly borrowed to make ends meet," said Howard Wheeldon, analyst at BGC Partners in London, commenting on the rate cuts.
"But will they produce a return to growth? Chances are they won't."
The European Central Bank cut its key interest rate by a record 0.75 percentage points to 2.50 percent and the Bank of England cut by a full percentage point to 2.0 percent.
In Sweden, the central bank reduced its benchmark rate by 1.75 percentage points to 2.0 percent in the sharpest cut since 1992 and Denmark cut its rates by 0.75 points to 4.25 percent in line with the ECB move.
The moves failed to inspire confidence among investors, however.
"The moves underscore the breadth of the economic slowdown and the central banks' urgency to jump start the economies," said Mary Ann Hurley at the US brokerage DA Davidson & Co.
US bonds rose as yields fell to fresh record lows amid an investor stampede to ultrasafe investments. The yield on the 10-year US Treasury dropped to 2.570 percent from 2.676 percent Wednesday and that on the 30-year bond eased to 3.084 percent against 3.184 percent.
"Treasuries haven't seen such low yields in decades," analysts at Briefing.com said. "Stocks were shunned almost entirely across the board."
In other markets, Brazil's Bovespa (news) shed 0.48 percent and the S&P/TSX index in Canada dropped 2.88 percent.
Asian stock markets ended mixed on Thursday after an overnight rally on Wall Street Wednesday.
Tokyo closed down 0.62 percent, Hong Kong lost 0.6 percent and Seoul shed 1.23 percent.
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