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Rate cut hope lifts global shares Rate cut hope lifts global shares
(about 2 hours later)
UK and other European shares have risen sharply, buoyed by growing expectations that central banks will cut interest rates further.UK and other European shares have risen sharply, buoyed by growing expectations that central banks will cut interest rates further.
The UK's FTSE 100 index was up 5.7%, while France's Cac 40 had added 7%. The gains followed an 11% jump in the US Dow Jones index on Tuesday. The UK's FTSE 100 index was up 6.2%, while France's Cac 40 had added 7.2%.
The Federal Reserve is widely tipped to cut US rates later on Wednesday. In New York, the Dow Jones Industrial Average was barely changed, rising 0.1% in early trading, following its 11% jump on Tuesday.
Many analysts expect the Bank of England and European Central Bank to follow suit next week. The Federal Reserve is widely expected to cut US rates from 1.5% to 1% later on Wednesday.
Many analysts expect the Bank of England and European Central Bank to follow the American lead and cut rates next week.
The optimism is fuelled by the prospect of rate cuts Nicole Sze, Bank Julius BaerThe optimism is fuelled by the prospect of rate cuts Nicole Sze, Bank Julius Baer
The Fed is expected to trim US rates by half a percentage point to 1%.
UK interest rates are currently at 4.5%, after the Bank of England cut them by half a percentage point earlier this month in a co-ordinated move with both the Fed and European Central Bank (ECB).UK interest rates are currently at 4.5%, after the Bank of England cut them by half a percentage point earlier this month in a co-ordinated move with both the Fed and European Central Bank (ECB).
The ECB's interest rate for the eurozone stands at 3.75%.The ECB's interest rate for the eurozone stands at 3.75%.
'Fuelling optimism'
Growing expectations of a rate cut by the Fed saw the Dow Jones close Tuesday up 10.88%, or 889.35 points, at 9,065. This was its second biggest one-day points rise, although it still leaves the index down 16% in the month so far.
FTSE 100 INDEX: 29 October 2008*All Times GMTFTSE 100 INDEX: 29 October 2008*All Times GMT
The gains on Wall Street helped Japan's Nikkei index to end Wednesday up 7.7%, with Japanese sentiment further lifted by hopes of a rate cut in Tokyo. The Nikkei is down 27% for the month. 'Fuelling optimism'
Tuesday's jump in share prices on Wall Street inspired a 7.7% rise in Japan's Nikkei index on Wednesday, with the Japanese market also lifted by hopes of a rate cut in Tokyo.
"The optimism is fuelled by the prospect of rate cuts," said Singapore-based investment analyst Nicole Sze of Bank Julius Baer & Co."The optimism is fuelled by the prospect of rate cuts," said Singapore-based investment analyst Nicole Sze of Bank Julius Baer & Co.
"Wall Street's rally brought some extra confidence to the market, reminding investors that selling might have been overdone and this might be a good time to pick some values.""Wall Street's rally brought some extra confidence to the market, reminding investors that selling might have been overdone and this might be a good time to pick some values."
The only major market bucking the trend was in Germany, where the Dax index was down 0.2% as a result of 38% drop in Volkswagen's share price. The only major market bucking the trend was in Germany, where the Dax index was down 1.5% as a result of a 41% drop in Volkswagen's share price.
Volkswagen's share price had jumped on Tuesday because of panic buying from certain hedge funds, which had wrongly bet that the price would fall.Volkswagen's share price had jumped on Tuesday because of panic buying from certain hedge funds, which had wrongly bet that the price would fall.