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US warns of further bank failures US warns of further bank failures
(about 3 hours later)
The US treasury secretary has warned some banks will still fail despite the $700bn (£406bn) rescue package to shore up the financial system.The US treasury secretary has warned some banks will still fail despite the $700bn (£406bn) rescue package to shore up the financial system.
Henry Paulson called for the plan's swift implementation, but said the financial crisis would not end soon.Henry Paulson called for the plan's swift implementation, but said the financial crisis would not end soon.
Seven central banks on Wednesday cut interest rates in an effort to steady the faltering global economy.Seven central banks on Wednesday cut interest rates in an effort to steady the faltering global economy.
Although the moves did not fully quell investor fears, Thursday saw a calmer climate on Asia's main stock indexes. There was also a co-ordinated trimming of interest rates by seven central banks including the Federal Reserve.
Japan's benchmark Nikkei was down slightly in late trading after surrendering earlier gains - which had been triggered by the Bank of Japan injecting two trillion yen ($19.9bn; £11.5bn) into the money markets in an effort to calm fears.
However, Prime Minister Taro Aso called for more action to boost the country's faltering economy - in addition to a 2 trillion yen economic stimulus plan proposed in August.
The Nikkei had suffered its biggest one-day drop in 21 years on Wednesday, with the index shedding nearly 10% of its value.
In Sydney, Australia's main share index fell 1.8%, but Hong Kong's Hang Seng index added 2.7% after its central bank announced a half a percentage point cut to its interest rate, taking it to 2%.
South Korea's stock market rose 2.5% after the central bank announced an interest rate cut of a quarter of a percentage point.
Global action
In his bleak assessment, Mr Paulson warned the ongoing financial chaos had "seriously impacted" the economy.
"Even with the new treasury authorities, some financial institutions will fail," he added.
There was an equally stark warning from the International Monetary fund, which said global financial markets were facing their most dangerous shock since the 1930s.
In an unprecedented co-ordinated move on Wednesday, rates were cut by the Bank of England (to 4.5%), the US Federal Reserve (to 1.5%), and the European Central Bank (ECB) (to 3.75%), with similar cuts from the central banks of Canada, Sweden and Switzerland.
Wednesday's co-ordinated rate cuts surprised many traders
Although it did not cut its own rate - which is just 0.5% - the Bank of Japan expressed its "strong support" of the policy. In a separate move, China cut its own interest rate by 0.27%.
While European and US markets initially reacted well to the news, they later lost ground as investors were unconvinced the rate cuts were enough to solve the financial crisis.
In New York, the main Dow Jones stock index lost ground for its sixth consecutive session, ending 2% down.
The heads of the IMF and the World Bank are due to discuss the world's ongoing financial turmoil in Washington later, and finance ministers from the G7 group of industrialised nations are meeting later this week.
More work to doMore work to do
The IMF's chief economist, Oliveri Blanchard, said the orchestrated rate-cuts could not solve the world's financial crisis on their own but "were clearly a step in the right direction".The IMF's chief economist, Oliveri Blanchard, said the orchestrated rate-cuts could not solve the world's financial crisis on their own but "were clearly a step in the right direction".
The fact that the central banks have had to take such extreme measures underlines how bad market conditions have become Julian JessopCapital Economics Central banks' official statementsSome mortgage rates fallMoney gloom: your commentsThe fact that the central banks have had to take such extreme measures underlines how bad market conditions have become Julian JessopCapital Economics Central banks' official statementsSome mortgage rates fallMoney gloom: your comments
But he warned "there will be tough economic times ahead".But he warned "there will be tough economic times ahead".
Chief international economist at Capital Economics, Julian Jessop, said the rate cut would provide a "temporary boost to confidence", but warned there was still a lot more work to do.Chief international economist at Capital Economics, Julian Jessop, said the rate cut would provide a "temporary boost to confidence", but warned there was still a lot more work to do.
"The fact that the central banks have had to take such extreme measures underlines how bad market conditions have become," said Mr Jessop."The fact that the central banks have had to take such extreme measures underlines how bad market conditions have become," said Mr Jessop.
On Wednesday, the UK government unveiled a package of measures aimed at rescuing the banking system which could add up to £400bn.On Wednesday, the UK government unveiled a package of measures aimed at rescuing the banking system which could add up to £400bn.
Italy also unveiled details of a banking rescue plan that could involve the government taking stakes in failing banks.Italy also unveiled details of a banking rescue plan that could involve the government taking stakes in failing banks.
The US Federal Reserve, meanwhile, agreed to provide insurance giant American International Group with a $37.8bn loan on top of the $85bn loan given to the troubled firm last month.The US Federal Reserve, meanwhile, agreed to provide insurance giant American International Group with a $37.8bn loan on top of the $85bn loan given to the troubled firm last month.
Are you an employee of a company in financial difficulties, a share holder or run a small business? Tell us how have you been affected by the current crisis using the form below:Are you an employee of a company in financial difficulties, a share holder or run a small business? Tell us how have you been affected by the current crisis using the form below:
In most cases a selection of your comments will be published, displaying your name and location unless you state otherwise in the box below.In most cases a selection of your comments will be published, displaying your name and location unless you state otherwise in the box below.
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