Central banks move to calm markets

Late surge pushes Dow up 410 points after co-ordinated attempt to pump $180bn into markets.

The central banks acted after Asian markets had continued their downward spiral [AFP]
The central banks acted after Asian markets had continued their downward spiral [AFP]
The central banks acted after Asian markets had continued their downward spiral [AFP] The central banks acted after Asian markets had continued their downward spiral [AFP]

It was the Dow’s biggest percentage point gain since October 2002 but still left the index down about 400 points for the week after routs on Monday and Wednesday.

Broader US stock indicators also jumped, with the Standard & Poor’s 500 index rising 50.12 points, or 4.33 per cent, to 1,206.51, and the Nasdaq composite advancing 100.25 points to 2,199.10, and increase of 4.78 per cent.

Al Jazeera’s John Terrett, reporting from New York, said US markets had risen following reports that Henry Paulson, the US treasury secretary, had suggested that the US government was considering further interventions to aide the markets.

Paulson has reportedly considered setting up a new form of the Resolution Trust Corporation, a body set up by the US government in 1989 to help liquidate bad company debts, particularly in areas related the property market, but closed down again in 1995.

Earlier on Thursday George Bush expressed his concern at the financial crisis gripping the markets but offered no new policies to combat the situation.

“The American people are concerned about the situation in our financial markets and our economy,” Bush said.

“And I share their concerns.”

Cash injection

European bourses and the US stock market had all recorded opening gains on Thursday but the FTSE-100 index in London ended down 32 points at 4,880 and the French Cac 40 was down 42 at 3,957.

The world’s financial system has been
rocked by the crisis {EPA]

Earlier on Thursday, referring to the injection of money by the banks, the Bank of England, said: “Today [the six central banks] are announcing co-ordinated measures designed to address the continued elevated pressures in US dollar short-term funding markets.

“These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets.”

The plan to increase liquidity in money markets came after Asian financial markets performed poorly in Thursday trading.
Share prices on Hong Kong’s Hang Seng index plunged nearly eight per cent on Thursday, before recovering.

Tokyo’s Nikkei index fell more than three per cent, South Korea’s Kospi fell more than two per cent and Australian shares also fell more than 3.5 per cent in early trading.


McCain comments


The falls come in spite of the US government’s announcement on Tuesday that it would rescue the troubled insurance group AIG by lending it $85bn in exchange for a nearly 80 per cent stake in the company.


Speaking on Thursday, John McCain, the Republican presidential candidate, said that if he was elected president he would fire Christopher Cox, the US Securities and Exchange Commission chairman, for failing in his oversight of Wall Street.


The Arizona senator also called for a new Mortgage and Financial Institutions trust to work with regulators and the private sector to strengthen financial institutions that are weak before they become insolvent.


Addressing a rally in Iowa, McCain said: “For troubled institutions this will provide an orderly process through which to identify bad loans and eventually sell them.”


Immediate action


William Browder, CEO of the investment group Hermitage Capital Management, told Al Jazeera that the current financial crisis demanded immediate action.

“It is a problem of global proportions and it is not just happening in one country. I suspect that this is not going to be the last big action that the regulators take,” he said.

“In a moment like this, where everyone is competing with each other to sell everything, it is very hard to say that money is safe even under the mattress.

“If the governments are investing millions into the markets, where is that money coming from? They probably printed it. Even the money under the mattress will be inflated away.”

Source: Al Jazeera, News Agencies


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