Asian stocks start to recover after Federal Reserve cut interest rates

The global credit crunch saw the collapse of US banking giant, Bear Stearns, over the weekend and the news raised fears in stock markets around the world.

Amid the panic and fear in the stock markets, the Federal Reserve cut interest rates by 0.75% yesterday and markets in Asian have started to recover. In Japan, the Nikkei index rose by 3%, while shares in Australia, Taiwan and South Korea increased by 2%.

On Monday, Japan’s benchmark Nikkei index fell to a 2½ year low.

Since mid-September, the Federal Reserve has cut interest rates 6 times with the economy reeling from a credit crisis caused by a decline in the US property market.

Yesterday on Wall Street, the Dow Jones stock index recovered from recent losses and experienced its biggest one-day gain for over 5 years.

Correspondents say even though credit crunch is not over, investors have been reassured the Federal Reserve is in control.

US Treasury Secretary Henry Paulson yesterday admitted that the US economy was currently facing a ‘sharp decline‘, but hoped for a recovery later this year.

Yesterday, US investment bank giants, Goldman Sachs and Lehman Brothers, announced smaller than expected falls which meant Japanese bank sector investors were calmed by the results.

However, analysts are warning of more turmoil ahead.

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