Markets rally after US cash boost

US and Asian indices jump after US central bank announces $200bn cash injection plan.

    Thousands have had their homes foreclosed in the
    sub-prime mortgage crisis gripping the US [AFP]
    Oil prices were steady in Asia, having fallen from a record near-$110 a barrel the previous day, while gold prices continued a retreat from a record high seen last week.
     
    Cash injection
     
    The Fed announced the plan on Tuesday to pump $200bn into financial markets amid continued instability following the US sub-prime mortgage crisis.
     
    The move is to be co-ordinated with central banks in Europe, the UK, Switzerland and Canada, with each announcing measures to address the lack of money in the global financial system.
     
    The Fed said it was offering the money in a new Term Securities Lending Facility auction, which will allow a group of 20 large investment firms to borrow the money for a 28-day period.
     
    The move was designed to get more funds to banks hit by the credit crunch and cautious about interbank loans.
     
    Indices jump
     
    Reacting to the Fed's move, the Dow Jones industrial average rose 416.66 points, or 3.55 per cent, to 12,156.81.
     
    The Standard & Poor's 500 Index climbed 47.28 points, or 3.71 per cent, to 1,320.65 in its biggest daily percentage gain since October 2002.
     
    The Nasdaq Composite Index gained 86.42 points, or 3.98 per cent, to 2,255.76.
     
    Shares of mortgage-related companies and banks led the way, helping the market recover after three days of losses.
     
    Home builders' shares also rallied, as the Fed's action could help boost mortgage lending and ease the drag of the housing slump on the broader economy.

    SOURCE: Agencies


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