Dow Jones Trades Well On Renewed Fed Interest Rate Break

The Dow Jones came out all guns blazing this morning after renewed promises of a Federal Reserve interest rate cut reached the market.

After a torrential day of sell offs on the exchange yesterday, analysts had predicted that markets would continue on a downward trend throughout the course of the day.

Indeed, morning markets in Europe had traded nervously after heavy losses yesterday on the US exchanges, and Asian markets closed down off the back of the US news.

However, analysts are beginning to forecast a pending interest rate cut as the Federal Reserve gears up to its next policy meeting, which would help ease the situation for sub-prime lenders.

The sub-prime market which lends to those with less than perfect credit records has been the source of much controversy and woe for the mortgage markets, sufficient to see many major lenders sent to the verge of liquidation.

After mortgage lenders allowed sub-prime borrowers to exceed their borrowing limit, the number of defaults and foreclosures have risen with interest rates in recent months.

Furthermore, with this tying up bank liquidity, markets worldwide were thrown into turmoil over the possibility of a credit crunch, which analysts were fearing could lead to a global recession.

However, after renewed predictions about the next move of the Federal Reserve, markets traded strongly towards the close of the day.

The main US index, the Dow Jones, had gained back much of yesterday’s losses, coming to rest up 247.44 points. The index currently sits at 13289.3, with upwards momentum to the end.

Meanwhile, the smaller NASDAQ stock exchange was also up, gaining 62.52 points on the day to take it to 2563.2 for trading tomorrow.

Results from both markets helped turnaround trading in Europe, which had been cautious as to the impact of the US situation.

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