Central banks stem market bleeding

news by www.mrchat.net

Asia stock markets have moved cautiously higher following a co-
ordinated move by central banks across the world to cut their key
interest rates in an attempt to stave off an economic meltdown.

Central banks in the US, Europe, Britain, Switzerland, Canada, Sweden,
Hong Kong and China cut their key lending rates in unison on
Wednesday.

The unprecedented move intended to stimulate the economy by
encouraging consumers and businesses to spend more readily on lines of
credit, had appeared to have little impact on volatile European and US
markets on Wednesday.

Banks remained nervous about lending between each other for fear of
not being able to recover loans.

The Dow Jones Industrial Average in the US rallied 150 points after
the rate cut announcement but dropped sharply in the last half hour of
trading to close more than 200 points or 2.2 per cent lower.

But many Asian markets moved into positive territory on Thursday a day
after suffering record falls.

Japan's benchmark Nikkei index was in and out of positive territory in
the morning but ended the session up 1.3 per cent after having
suffered its biggest one-day loss - 9.4 per cent - in more than 20
years on Wednesday.

Other Asian bourses such as Hong Kong's Hang Seng, South Korea's Kospi
and Singapore's Straits Times were higher but Australia's benchmark
S&P/ASX 200 was down more than two per cent, extending its five per
cent slide on Wednesday.

Australia's central bank had already cut it key interest rate by a
full percentage point on Tuesday - double the amount that was expected
and the biggest rate cut since 1992 - but it brought only a brief
respite to Australian markets.

South Korea's central bank followed other banks' lead on Thursday,
cutting its key interest rate for October by 25 basis points to five
per cent - the first since November 2004 and a reverse from a quarter
of a percentage point increase in August to fight inflation.

Paulson warning

Henry Paulson, the US treasury secretary, welcomed the co-ordinated
central bank rate cuts as a "sign that central banks around the world
are prepared to take the necessary steps to support the global economy
during this difficult time".

Speaking to reporters on Wednesday ahead of a gathering on Friday of
finance ministers and central bankers from the G7 industrialised
nations, he urged governments to "continue to take individual and
collective actions to provide much needed liquidity, strengthen
financial institutions through the provision of capital ... and
protect the savings of our citizens".

And he urged greater unity in central bank efforts, "so that the
action of one country does not come at the expense of others or the
stability of the system as a whole".

Despite the unprecedented central bank efforts though, Paulson warned
on Wednesday that global financial markets remained severely strained
and several more banks would probably still collapse despite the
$700bn bailout plan approved last week.

Saying "the turmoil will not end quickly and significant challenges
remain ahead", Paulson urged patience and said the government was
working hard to implement the plan but that it would be a few weeks
before it kicked in.
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