Rate cut hope lifts global shares
October 29, 2008
Shares have been very volatile in recent weeks
UK and other European shares have risen sharply in early trading, buoyed by growing expectations that central banks will cut interest rates further.
The UK’s FTSE 100 index was up 5.3% to 4,134, while France’s Cac had added 5.9%. The gains followed an 11% jump in the US Dow Jones index on Tuesday.
The Federal Reserve is widely tipped to cut US rates later on Tuesday.
Many analysts expect the Bank of England and European Central Bank to follow suit next week.
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The Fed is expected to trim US rates by half a percentage point to 1%.
UK interest rates are currently at 4.5%, after the Bank of England cut them by half a percentage point earlier this month in a co-ordinated move with both the Fed and European Central Bank (ECB).
The ECB’s interest rate for the eurozone stands at 3.75%.
‘Fuelling optimism’
Growing expectations of a rate cut by the Fed saw the Dow Jones close Tuesday up 10.88%, or 889.35 points, at 9,065, its second biggest one-day points rise.
This helped Japan’s Nikkei index end Wednesday up 7.7%, with Japanese sentiment further lifted by hopes of a rate cut in Tokyo.
“The optimism is fuelled by the prospect of rate cuts,” said Singapore-based investment analyst Nicole Sze of Bank Julius Baer & Co.
“Wall Street’s rally brought some extra confidence to the market, reminding investors that selling might have been overdone and this might be a good time to pick some values.”
While global stocks have rallied in recent days, they remain considerably lower than they were in September.
As of 27 October, the Dow Jones had fallen 25% during the month.
Source: bbc.co.uk/
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