Equity markets supports Central banks

Currencies Direct October 14th 2008 - 2 minute read

Equity Markets support Central Banks

UK and European moves to restore confidence in financial markets were met with strong approval by markets yesterday as the FTSE, Dax and CAC40 all rebounded. The US recorded is largest one day rally since the recovery following the 1929 crash while Asian shares continued the trend overnight with the Nikkei climbing a record 14.2%, and the Hang Seng up 4%.

The FTSE gained 8.3% on the back of the details that emerged of the UK government’s plans to inject some £37bn that will result in a part nationalisation of some British banks. The UK model was mirrored in the Eurozone with a number of nations announcing plans. Germany guaranteed €400bn of interbank lending and provided a €100bn fund to inject capital while France guaranteed up to €320bn of interbank lending with a further €40bn at its disposal to provide new capital. The Dax and CAC40 both ended the day over 11% higher.

The US has this morning announced that it will invest $125bn in nine major American banks as part of its $700bn plan, with Treasury Secretary Henry Paulson is due to speak later today to discuss the plans which also involve a further $125bn to recapitalise financial institutions across the US. The Dow rose 11.08% yesterday.

Three month GBP Libor set slightly lower at 6.27 and three month Dollar Libor fell 7 basis points to 4.75, in what may be signs that interbank lending markets are reacting positively to government intervention.

In economic data released today, UK CPI is forecasted to hit 5.1% when published this morning however this is widely perceived to be the peak as inflationary pressures are expected to ease. The RICS house prices index of estate agent and surveyor sentiment fell to -84, down from -82 in August. The figure of 11.5 sales per agent for the quarter equates to less than one sale per week in the 3 months to September as UK home sales fell to their lowest levels in at least 30 years.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

The contents of this report are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. Currencies Direct cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.

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