Wednesday October 29, 09:18 PM
Global stock markets mainly higher on credit easing
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NEW YORK (AFP) - Global stock markets saw some spectacular gains Wednesday, with investors buoyed by prospects for global interest rate cuts to help the world economy resist a slide into recession.
But Wall Street finished mainly lower as investors digested gains from a powerful rally a day earlier.
Still, the tone of trade was generally positive, according to analysts, who cited some further thawing in credit markets that has frozen economic activity in many part of the world.
"Short-term money-market rates trended downward again as financial institutions became slightly more willing to lend to each other after the recent guarantee of new bank debt issuance by European governments and liquidity injections by central banks," said Zach Witton at Economy.com.
In New York, the Dow Jones Industrial Average fell 77.26 points (0.85 percent) to finish at 8,987.86, while the Nasdaq (NASDAQ: news) rose 7.74 points (0.47 percent) to 1,657.21.
The broad-market Standard & Poor's 500 index retreated 10.42 points (1.11 percent) to 930.09.
The major US indexes swung in and out of positive territory after Tuesday 's huge bargain-hunting rally -- the Dow gained more than 10 percent -- following days of sell-offs.
"The trigger for yesterday's rally was that the Fed began buying commercial paper from companies," said Ed Yardeni at Yardeni Research.
"It is unfortunate that the credit crisis has necessitated this extraordinary intervention by the central bank in the money markets. However, it seems to be working."
Wall Street had largely anticipated the action by the US Federal Reserve, which cut its key lending rate a half point Wednesday to match a historic low of 1.0 percent.
Analysts said the Federal Open Market Committee (FOMC) action and an unusually bleak assessment suggests the Fed could trim rates even more to revive growth and stave off a deflation threat.
Ian Shepherdson, chief US economist at High Frequency Economics, said the FOMC produced "a very downbeat statement, with all mention of upside inflation risks expunged from the record."
"The door is open to further easing, with the FOMC stating baldly that 'downside risks to growth remain,' ... we view this as the first entirely realistic assessment from the Fed in this whole cycle. We expect another 50 basis-point cut on December 16."
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 while in Paris the CAC gained 9.23 percent to 3,402.57.
By contrast, the Frankfurt DAX fell 0.31 percent to 4,808.69, dragged down by Volkswagen (Xetra: 766400 - news) . VW shares surged on Monday and Tuesday on news that Porsche (Xetra: 693773 - news) had boosted its stake in Europe's largest auto manufacturer.
In other markets, Brazil's Ibovespa jumped 4.37 percent and Toronto's S&P/TSX added 3.82 percent.
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.
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