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Stock markets steady after central bank stimulus plan Stock markets steady after central bank stimulus plan
(about 1 hour later)
European markets have opened flat after strong gains on Wednesday sparked by a plan by some of the world's biggest central banks to stimulate lending. European markets opened flat after strong gains on Wednesday sparked by a plan by some of the world's big central banks to boost lending.
Earlier, Asian markets rose strongly, with Japan's Nikkei closing up 1.9%, South Korea's Kospi climbing 3.7% and Hong Kong's Hang Seng 5.6% higher. Earlier, Asian markets rose strongly, with Japan's Nikkei closing up 1.9% and Hong Kong's Hang Seng 5.6% higher.
Investors were buoyed by the co-ordinated action to offer commercial banks cheaper access to US dollars. Markets shook off downbeat comments from the new head of the European Central Bank (ECB) and higher yields on Spanish bonds.
On Wednesday, China also said it would free up money for its banks to lend. Mario Draghi said the eurozone economic outlook faced heightened risks.
The US Federal Reserve, the European Central Bank, and the central banks of the UK, Canada, Japan and Switzerland will take joint action from 5 December. In its latest bond auction, Spain raised its target of 3.75bn euros ($5.1bn; £3.2bn), but was forced to pay higher interest rates to borrowers than in previous sales.
As well as cheaper US dollars, the central banks will also provide easier access for lenders to other major currencies as and when they need it. However, the rates of between 5.19% and 5.54% on three, four and five-year bonds were well below the 7% level that is widely seen as unsustainable.
A similar bond auction in France raised almost 4.5bn euros. Here, however, interest rates fell from a previous auction to 3.18% on 10-year bonds and 3.65% on 15-year bonds.
Earlier, Mario Draghi, president of the ECB, told the European Parliament that "downside risks" to the eurozone economic outlook had increased.
He also said temporary measures by the bank, such as buying up government debt, would be limited.
The bank has been buying up debt from some eurozone members to try and boost market confidence.
Cutting costs
On Wednesday, the US Federal Reserve, the European Central Bank, and the central banks of the UK, Canada, Japan and Switzerland said they would take joint action to ease tensions in the global financial system from 5 December.
Based around a transaction called dollar swaps, the plan cuts the cost of borrowing the US currency by half a percentage point.Based around a transaction called dollar swaps, the plan cuts the cost of borrowing the US currency by half a percentage point.
This should, according to policymakers, trickle down and make it easier for businesses and households to get access to finance. As well as cheaper US dollars, the central banks will also provide easier access for lenders to other major currencies as and when they need it.
These measures should, according to policymakers, trickle down and make it easier for businesses and households to get access to finance.
Analysts said sentiment was lifted by the hope that the plan may limit market volatility and go some way in helping to find a solution to the ongoing debt and economic problems in the eurozone.Analysts said sentiment was lifted by the hope that the plan may limit market volatility and go some way in helping to find a solution to the ongoing debt and economic problems in the eurozone.
Also on Wednesday, China said it would free up money for its banks to lend, which was also welcomed by investors.
Wall Street's Dow Jones index saw its biggest gain since March 2009, rising 4.2%.Wall Street's Dow Jones index saw its biggest gain since March 2009, rising 4.2%.