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| US shares make stunning recovery |
| US shares rebounded on Wednesday on fresh hopes that regulators will steer the US economy out of a recession.
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| UNITED STATES OF AMERICA
, 24-January-2008
1:49:14 AM |
| All three stock market indexes erased deep losses to end strongly ahead. The Dow Jones rose 2.5% at 12,270.17, while the Nasdaq turned around a 4% decline.
The rally followed news of a plan to bail out bond insurers, which lie at the heart of the financial system. They guarantee about $2 trillion of assets.
Earlier, European stocks fell. The UK's FTSE 100 was down by 3.9% at one point.
Panic has swept through stock markets worldwide on fears that key global economies will enter recession.
Relief rally
On Tuesday, the US Federal Reserve made its biggest rate cut for 25 years to stoke up growth and bolster markets.
However, worries persisted that the move may have come too late, as many firms have already reported lower profits and a worsening business environment.
Another major concern in the US has been the fear that bond insurers embroiled in the sub-prime crisis will not be able to cover their liabilities.
This could force banks to write down further losses on investments backed by crisis-hit sub-prime mortgages.
This meant news of the government plan to inject capital into bond insurers gave fragile confidence in the financial sector a boost, and sent shares in banks, including Citigroup and JP Morgan surging, while technology firms also gained.
The technology-heavy Nasdaq rose 1%, while the wider S&P 500 index also ended ahead, up 2.1%.
But volatility is expected to persist in the coming weeks.
Market movers
Earlier, the UK's FTSE 100 index finished a nerve-wracking session 131 points, or 2.2%, lower at 5,609.3, erasing gains it had made on Tuesday.
Germany's Dax lost 4.9% at 6,439.21, while France's Cac 40 was down 4.3% at 4,636.76.
Shares suffered after the European Central Bank hinted it would not follow the Fed by slashing rates, and analysts said the Bank of England was unlikely to accelerate rate cuts.
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