Markets on rollercoaster ride amid concerted rate cuts

9th October 2008, Comments 0 comments

The central banks of the United States, Britain, Canada, Switzerland, Sweden and China, as well as the eurozone's European Central Bank, delivered a 50 basis points cut in their lead rates in a bid to ease monetary conditions and shore up market liquidity.

A concerted rate-cutting by the central banks of the world's economic heavyweights appeared to be meet Wednesday with a positive, if tentative, response on European exchanges and early gains on Wall Street. But markets and investors were still obviously on a rollercoaster ride much of the time.

The central banks of the United States, Britain, Canada, Switzerland, Sweden and China, as well as the eurozone's European Central Bank, delivered a 50 basis points cut in their lead rates in a bid to ease monetary conditions and shore up market liquidity.

The move came too late to affect markets in Asia, which saw further massive losses in the wake of Wall Street's drop of five percent, with for example, Japan's leading Nikkei plunging 952.58 points, or 9.38 percent, to end at 9,203.32.

But a half hour into the new Wall Street session on Wednesday, the Dow Jones index had gained almost 105 points, or 1.1 percent, to reach 9,552 points.

In Europe, stocks began plunging in the wake of Wall Street's losses Tuesday and the early losses in Asia, but then the rate cut announcement triggered encouraging rebounds on a number of exchanges.

In London, the FTSE 100 Index started out with a 7 percent plunge, only then to rebound after the rate cut announcement. By lunchtime, the index was up almost 39 points to 4,644 points.

In Paris, the benchmark CAC 40 was on a similar roller-coaster ride. Trading was briefly suspended in the morning when a rush of sell orders sent the index plunging more than 8 percent. But after the rate cut announcement, shares rebounded strongly - only for a new pessimism to set in. At mid-afternoon, the CAC 40 was down 4.7 percent to 3,557.33 points.

In Frankfurt, German stocks rallied slightly Wednesday after the interest rate cuts. As of mid-afternoon, the 30-share DAX was running at 5,256 points, down 1.3 percent from Tuesday's close - but more than 300 points higher after the DAX had initially plunged 8.6 percent to around 4,900 points.

In Amsterdam, the AEX at mid-afternoon was at 296.15 points. While this was down 4.3 percent from Tuesday's close, it was well above the early-session five-year low of 280.52 points.

In Madrid, the Ibex-35 was down by 3.1 percent at 10,535 points at mid-afternoon. But Miguel Blesa, president of the Caja Madrid savings bank, said he expected the rate cuts by central banks to "take effect" as soon as investors recovered confidence in the markets.

In Italy, the Milan Bourse was volatile, first plunging 7 percent to drop to a five-year low, only then to recover slightly on the rate cut announcement. At mid-afternoon, the benchmark S&P/Mib index was down about 4.1 percent at 22,658 points.

In Warsaw, the main WIG20 index was down 1.83 percent to 2,146 points at mid-afternoon. But this was an improvement after the index had initially plunged by over 4.1 percent.

In Vienna, the ATX index was off 8.5 percent at mid-afternoon, with more than half the shares losing over 10 percent. But the head of Austria's chamber of commerce Christoph Leitl welcomed the lower interest rates. "Companies urgently need low-priced money for future investments," he said.

In Stockholm, the OMXS Stockholm 30 benchmark index was down 3.3 percent in mid-afternoon. The Copenhagen, the OMX Copenhagen 20 Index was down 4.2 percent while in Helsinki the decline was 1.8 percent. In Oslo, the main index was down 2.6 percent with declines for energy group Statoil Hydro and telecommunications group Telenor.

In Prague, the main PX index closed down almost 3.9 percent at 1,042.6 points, but the figure represented a recovery from much lower readings in the morning trading before the market responded to the rate cut announcement.

In the Baltic region, stock markets were in a contrary mood Wednesday. All three indexes were down, with Tallinn losing 6.80 percent, Riga 6.05 percent and Vilnius shedding a whopping 8.19 percent. The guideline Baltic Benchmark Index (BBI), which includes data from all three exchanges, plunged 8.44 percent to close at 311.18.

In the Mideast, Arab stock markets dived for the fourth day in a row. However, two of the major regional markets, the Saudi and Kuwaiti stock exchanges, trimmed their losses at a later stage apparently in response to local and global steps taken to stem the turmoil.

The Tadawul All Share Index (TASI) of the Saudi stock exchange, the Arab world's largest bourse, opened at a loss of about 8 percent but closed at a decline of 1.5 percent. Kuwait's all-share price index opened at a loss of more than 3 percent but closed at 1.41 percent in the red.

DPA/Expatica

 

German agriculture minister nominated as Bavarian premier

The position was up for grabs after Guenther Beckstein announced last week that he would step down after a disastrous election setback for his conservative party.

 

Munich -- German Agriculture Minister Horst Seehofer won nomination Wednesday to become premier of the southern state of Bavaria, making his election a practical certainty.

The position was up for grabs after Guenther Beckstein announced last week that he would step down after a disastrous election setback for his conservative party, the Christian Social Union (CSU).

The caucus of CSU state legislators picked Seehofer as their candidate to lead the state's next government, with 88 percent in favor.

Berlin officials said no replacement had been chosen yet for the agriculture and consumer affairs portfolio Seehofer holds, but Gerd Mueller, 53, a CSU politician and current state secretary at the same ministry, was a front runner for the post.

The CSU, a potent force in Germany's national politics, had ruled the state of Bavaria for more than four decades without needing a coalition partner and is a key party in Chancellor Angela Merkel's federal coalition.

Merkel praised Seehofer, saying he was the "right choice" to lead the CSU in future elections.

The CSU lost nearly one-third of its voter support in state elections in Bavaria on September 28. With just 43 percent of voters backing it, the CSU will need a smaller party as coalition partner and is in talks.

Premier Beckstein's departure after just a year in office triggered a succession battle among fellow CSU politicians Seehofer, Bavarian Science Minister Thomas Goppel and the state's interior minister, Joachim Herrmann, but Herrmann and Goppel withdrew Tuesday.

Seehofer is also front-runner to take over party chairman Erwin Huber's position at a CSU membership conference later this month.

The post of party leader and premier had been united in the hands of veteran politician Edmund Stoiber until he was toppled in a party rebellion last year.

DPA/Expatica

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