Is the present financial crisis a global concern like the economy after the 9-11-2001 attacks?
*Financial Times, by Ed Crooks and Norma Cohen, October 8, 2008
“Central banks around the world announced a co-ordinated cut in interest rates on Wednesday, in response to mounting fears about the impact of the financial crisis on the world economy.
The US Federal Reserve, the European Central Bank, the Bank of England, and the central banks of Canada, Switzerland, Sweden and the United Arab Emirates all cut their main lending rate by 0.5 percentage points.
The People’s Bank of China also announced a rate cut of 0.27 percentage points. The Bank of Japan, which already has a main lending rate of 0.5 per cent, did not cut its rate, but expressed ‘strong support’ for the other banks’ moves.
The Fed, ECB and Bank of England issued statements with identical explanations for the move, saying inflationary pressures had started to moderate, and the recent intensification of the financial crisis had “augmented the downside risks to growth”.
The euro and sterling, which have fallen in recent weeks against the dollar, gained following the announcement, while the yen, which is seen as a reserve currency, lost ground.
Equities markets were off the day’s lows, helped by a higher open on Wall Street for the first time in five sessions, but in Europe shares remained in negative territory.
The S&P 500 was up 14.7 points or 1.5 per cent at 1,010.9 and the Dow Jones Industrial Average rose 91 points or 1 per cent to 9,538.9.
The FTSE 100 fell 2.3 per cent or 105 points to 4,500.3, but more than 300 points above the day low. The Dax 30 in Frankfurt slumped 3.1 per cent or 167 points to 5,159 and the CAC 40 in Paris was down 3 per cent at 3,621.8.
Asian markets, which closed before the co-ordinated bail-out, suffered heavy losses. The Nikkei 225 in Tokyo recorded its biggest one-day fall since 1987 and the Hang Seng in Hong Kong had its heaviest fall since 1973.
Oil prices rebounded from early losses on hopes that a global recession might be averted and government bond prices fell.
The co-ordinated central bank action, while highly unusual and a strong signal of the authorities’ determination to act, is not unprecedented.
There was a roughly co-ordinated series of rate cuts around the world following the terrorist attacks in New York in September 2001.”
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