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| Stocks fall on more credit fears | |
| (30 minutes later) | |
| US shares fell upon opening after US Treasury Secretary Henry Paulson said there would not be a quick solution to continuing credit squeeze fears. | |
| With investors concerned the crisis in the sub-prime mortgage market will make all loans harder to come by, the Dow Jones index fell 41 points to 13,081. | |
| Mr Paulson's comments came ahead of talks with Federal Reserve chairman Ben Bernanke over the situation. | |
| The early fall on the Dow Jones index dragged European markets lower. | |
| By 1335 BST, London's FTSE 100 had lost 25 points to 6,053. | |
| 'Volatility to continue' | 'Volatility to continue' |
| Shares have tumbled in recent weeks as US sub-prime mortgage market problems have spread, seeing global stocks being sold for safer investments. | Shares have tumbled in recent weeks as US sub-prime mortgage market problems have spread, seeing global stocks being sold for safer investments. |
| Until we see the actual relevant announcement [on interest cuts] this thinking will do little to eliminate any volatility Adam Neal, CMC Markets | Until we see the actual relevant announcement [on interest cuts] this thinking will do little to eliminate any volatility Adam Neal, CMC Markets |
| "We are still in a situation where we can expect some volatile days," said Richard Hunter, head of UK equities at Hargreaves Lansdown. | "We are still in a situation where we can expect some volatile days," said Richard Hunter, head of UK equities at Hargreaves Lansdown. |
| "On the one hand confidence is going to take a little while to return and on the other hand before such time as the extent of the credit problems are known it's going to be very difficult to move on in any meaningful way." | "On the one hand confidence is going to take a little while to return and on the other hand before such time as the extent of the credit problems are known it's going to be very difficult to move on in any meaningful way." |
| The stock market falls have seen investors sell equities and other riskier forms of investment, and investing in various government bonds around the world. | |
| That has seen bond prices rise and their yields fall. | That has seen bond prices rise and their yields fall. |
| On Monday, interest rates on three-month US Treasury Bills showed their biggest one-day drop since the October 1987 stock market crash as investors flooded into to buy the safest type of bond. | On Monday, interest rates on three-month US Treasury Bills showed their biggest one-day drop since the October 1987 stock market crash as investors flooded into to buy the safest type of bond. |
| And on Tuesday, eurozone government bond yields dropped, extending the previous session's falls, as continuing investor anxiety about a global credit squeeze supported demand. | |
| A further sign of the move to safer investments was seen in Asia on Tuesday as Japan's yen strengthened and emerging market debt spreads widened, both signs of renewed caution, analysts said. | A further sign of the move to safer investments was seen in Asia on Tuesday as Japan's yen strengthened and emerging market debt spreads widened, both signs of renewed caution, analysts said. |
| More rate cuts? | More rate cuts? |
| Adam Neal, a trader at CMC Markets, said speculation was building that the Federal Reserve would continue the process started last Friday with a cut in its main interest rate. | Adam Neal, a trader at CMC Markets, said speculation was building that the Federal Reserve would continue the process started last Friday with a cut in its main interest rate. |
| He added: "This would likely provide stocks with some further momentum, but until we see the actual relevant announcement this thinking will do little to eliminate any volatility." | He added: "This would likely provide stocks with some further momentum, but until we see the actual relevant announcement this thinking will do little to eliminate any volatility." |
| On Friday the Fed reduced the rate it applies to loans made between banks to 5.75% from 6.25%. | |
| Officially, the Federal Reserve is not scheduled to meet until 18 September. Some analysts argue that until then market jitters will remain. | Officially, the Federal Reserve is not scheduled to meet until 18 September. Some analysts argue that until then market jitters will remain. |
| Mortgage defaults | Mortgage defaults |
| The recent turmoil has stemmed from a sharp rise in US home loan defaults, triggering fears of a wider financial crisis. | The recent turmoil has stemmed from a sharp rise in US home loan defaults, triggering fears of a wider financial crisis. |
| The recent market volatility has been prompted by a wave of mortgage defaults in the US as the housing market slowed dramatically after a series of interest rate rises that have made paying back loans more expensive. | The recent market volatility has been prompted by a wave of mortgage defaults in the US as the housing market slowed dramatically after a series of interest rate rises that have made paying back loans more expensive. |
| The sub-prime sector makes loans to high-risk individuals and charges them higher rates of interest. | The sub-prime sector makes loans to high-risk individuals and charges them higher rates of interest. |
| The sector boomed when thousands of people took out loans during the housing boom that petered out in early 2006. | The sector boomed when thousands of people took out loans during the housing boom that petered out in early 2006. |