Shares begin to bounce back
Investors rocked by two days of market turmoil held their nerve today as London’s FTSE 100 Index continued its bounce-back.
London’s leading shares jumped almost 100 points, or 1.7%, as the market opened - building on the 160-point recovery yesterday after the US Federal Reserve’s surprise interest rate cut to help avert a recession.
Asian markets were bolstered overnight by the 0.75% cut – the Fed’s biggest in more than 25 years – with advances for Japan’s Nikkei 225, the Australian Stock Exchange and Hong Kong’s Hang Seng index.
Global exchanges were buoyed by New York's Dow Jones Industrial Average, which recovered a 465-point fall yesterday to finish 126.2 points lower - better than feared by most experts.
CMC Markets trader Matt Buckland said: “After yesterday’s excitement, many traders will be looking for a degree of calm as equity markets approach the mid-point of the week.
“There still has to be the chance that nerves could get the better of investors and another run of selling may be seen, but there does now have to be the scope to let the focus return to the fundamentals.”
Insurance giant Prudential led the Footsie fightback – followed by heavily-weighted mining and banking stocks which have suffered big losses in the market chaos.
Today’s gains follow two days of severe turbulence amid growing fears of a US recession.
On Monday, £77bn was wiped off London’s leading shares in the biggest one-day fall since the 9/11 terror attacks in 2001.
The Fed made its surprise intervention before the start of trading in the US yesterday to counter what it described as “increasing downside risks to growth”.
Although the move appears to have calmed the storm in markets, concerns remain over the long-term economic outlook.
Speaking to members of the Institute of Directors in Bristol, Bank of England Governor Mervyn King warned last night that food and energy prices were likely to rise this year, possibly pushing inflation over 3%.
He said: “The next year will pose economic challenges for all of us – more so than at any time since the Bank of England was given its independence in 1997.”
He appeared to open the way for an interest rate cut, saying: “We face a difficult balancing act in the course of 2008. But we start the year from a position in which bank rate, at 5.5%, is probably bearing down on demand.”
