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| Global markets rally after US cut |
| Global stock markets have risen after the US Federal Reserve's biggest interest rate cut for 25 years helped calm fears of a global economic slump.
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| UNITED STATES OF AMERICA
, 23-January-2008
2:48:54 AM |
| The UK FTSE 100 index opened 42 points or 0.8%, higher at 5,782. France's Cac added 1.3% and Germany's Dax rose 1.2%.
Japan's Nikkei 225 earlier closed up 2%, and Hong Kong's Hang Seng added 8%.
Despite the recoveries, which were sparked by the Fed cutting US rates to 3.5% from 4.25%, analysts predict more share volatility in coming weeks.
"Caution still rules the long-term picture," said Markus Steinbeis of Pioneer Investments.
Recession fears
While global investors appear to have welcomed the Fed's dramatic move, some investors cautioned that it seemed like a panic decision.
They also question whether it will be enough to avoid the US falling into a recession in the face of a sharp downturn in the American housing market, and signs of growing US unemployment and weakening consumer spending.
"The Fed's action provided a very positive surprise," said Tsuyoshi Segawa, strategist at Shinko Securities in Tokyo.
"But people are also starting to think that things may be so bad they needed to act."
Credit Suisse's chief strategist Shinichi Ichikawa added: "We consider the Fed's rate cut still insufficient for the global financial markets to completely recover and help the Japanese stocks to fully rebound."
In the US, the Dow Jones closed Tuesday 1.1% lower. Far bigger declines had been expected because US markets were closed for a public holiday on Monday, and had avoided the hefty falls that battered global shares.
The UK's FTSE 100 index closed Tuesday 2.9% higher, having fallen more than 4% in early trading.
France's Cac 40 closed 2.1% higher, while Germany's Dax index closed 0.3% lower, having earlier been down by about 2%.
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