Fed Rate Cuts Bring Markets Back To Life

Stock markets around the world appeared to recover some ground throughout the morning’s trade, after measures in the US to increase bank liquidity.

After a week of almost blanket red trading, stock markets across Asia, Europe and the US have traded well over the course of the morning, despite some analysts predicting an overall downward trend could continue over the next few weeks to months, as the full gravity of the US sub-prime situation is uncovered.

In London, the FTSE 100 index of leading companies had reached 6,103.1, up 38.90 points and completely turned around after falling below the 6,000 mark last week.

The DAX in Frankfurt echoed similar sentiments, up 27.42 to 7405.7 by 15.45 BST. The CAC in Paris had been one of the major movers of the day so far, up just under 50.00 points to 5418.5.

In the US, the Dow Jones index of leading shares, which had traded significantly down over the course of last week as the major source of credit crunch fears, began its trading day up 12.84 points to 13091.9, whilst its sister exchange the NASDAQ was also marginally up at the start of trade, gaining 7.38 points to 2512.4.

The turnaround comes after the US Federal Reserve announced its highly unorthodox move to cut the primary discount rate at which it lends money to banks, making it less expensive for cash-strapped mortgage lenders to increase their current cash assets.

After the catastrophic sub-prime lending crisis, many substantial lenders across the US have been left on the verge of liquidation, with extreme measures from central banks designed to save the ailing market and prevent a worldwide credit crunch.

Today’s positive trading has been well received by investment managers and pension funds across the globe, many of which have been left deep in the red after last week’s widespread sell-offs.

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