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European, Asian markets rise after Fed rate cut

European, Asian markets rise after Fed rate cut
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First Published: Mon, Aug 20 2007. 05 18 PM IST
Updated: Mon, Aug 20 2007. 05 18 PM IST
London: Global stock markets rose Monday, taking their cue from Wall Street’s recovery late last week after the U.S. Federal Reserve cut a key interest rate to stem worries about credit market losses hurting the economy.
In Europe, the major indexes built on their gains from Friday. The U.K’s FTSE-100 Index rose 0.8% to 6,113.30. France’s CAC 40 gained 1.3% to 5,434.42 and Germany’s DAX advanced 0.5% to 7,412.27.
The Nikkei 225 closed the day up 3% at 15,732.48 points on the Tokyo Stock Exchange, recouping more than half of the 5.42% nose-dive racked up Friday -- its largest single-day point loss since April 2000.
Traders and investors welcomed the Fed’s move Friday to cut its key discount rate a half percentage point to 5.75%. The Dow Jones industrial average surged 1.8% percent, and European indexes in the U.K., France and Germany rose as well.
Other major central banks including the European Central Bank have also injected billions of dollars this month in actions to steady nervous markets.
On Monday, the Bank of Japan injected 1 trillion yen (US$8.8 billion; euro6.5 billion) into money markets in a bid to curb rises in key interest rates _ the latest in a series of infusions since Aug. 9. The Reserve Bank of Australia as well bought 3.34 billion Australian dollars (US$2.7 billion; euro2.0 billion) of short-term securities.
Analysts said it’s too early to call whether the worst is over. Stock markets around the world have been on a skid since the U.S. subprime mortgage mess surfaced last month and spread.
“After a turbulent time for global equities last week ... the markets appear to have regained some stability this morning,” said Victoria Savage, a trader at CMC Markets in London.
But Patrick Mohr, strategist at Nikko Citigroup Ltd., a unit of Citigroup Inc., said the rampant nervousness means anything can send share prices fluctuating again.
“And we probably haven’t seen the end of the bad news in subprime,” he told Dow Jones Newswires.
U.S. stock futures were narrowly higher Monday as investors tried to assess whether the Federal Reserve will keep lowering interest rates.
Other global markets recovered, as the Fed’s move was viewed as a sign the U.S. is taking the recent market volatility seriously.
Australia’s benchmark had its biggest one-day gain in almost a decade as the benchmark S&P/ASX 200 surged 4.6%. Benchmark indexes also bounced back 5.9% in Hong Kong, 5.7% in South Korea and 5.3% in Taiwan. The Shanghai Composite Index gained 5.3%, and Singapore’s Straits Times Index gained 6.1%.
Michael Kurtz, a strategist at Bear Stearns Asia Ltd., said Asian economies are so dependent on the health of the American economy these days, any sign of danger in the U.S. economy is likely to rattle regional markets further.
“Although Asian institutions appear in aggregate to have minimal direct exposure to U.S. subprime credit instruments, we think the region does remain hostage to any potential U.S. real-sector downside should U.S. mortgage problems magnify,” he said in a report.
Japanese shares have taken an extra beating from the weakening dollar that has followed the subprime mortgage crisis. Many top Japanese companies are exporters that had been receiving a critical lift from a weak yen.
Among recovering export Tokyo issues were Toyota Motor Corp., which rose 4.2% and Canon, which climbed 7.6%. Sony Corp., another company largely dependent on exports and overseas earnings, gained 3.2%.
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First Published: Mon, Aug 20 2007. 05 18 PM IST