US rescue plan sparks Asian rally

IveSeenTheLight

Not directly a link to the housing issue, but if the result of the interest cuts in the US manages to stabalise the market, will the UK follow suit? and will this stabalise the markets in the UK?

From BBC news http://news.bbc.co.uk/1/hi/business/7206125.stm

US rescue plan sparks Asian rally

MARKETS VIDEO ROUND-UP

Shares markets are trying to find their level amid economic confusion


Japanese PM
US market recovery
A trader's view
George Soros

Asian share indexes bounced back on Thursday, boosted by an earlier rally on Wall Street.
Japan's benchmark Nikkei index closed 2.1% higher, while shares climbed by more than 2% in Mumbai, Hong Kong as well as Sydney.
The rebound came after the US publicised plans to stabilise its financial system.
US stock indexes had recovered after Tuesday's surprise decision by the Federal Reserve to cut interest rates.
European shares fell on Wednesday reflecting concerns that the European Central Bank would not make similar cuts.
On Thursday, Japan's benchmark Nikkei index was up more than 2% in early trading, although those gains later slipped back to 1.6%.
Strengthening bonds
Other leading Asian markets were also bolstered by optimism that a rescue plan for American bond insurers may be in the offing.
The plan would bail out bond insurers, which lie at the heart of the financial system, guaranteeing about $2 trillion of assets.
All three US stock market indexes erased deep losses on Wednesday to end strongly ahead. The Dow Jones rose 2.5% at 12,270.17, while the Nasdaq turned around a 4% decline.
The Standard & Poor's 500 Index added 2.14% to 1,338.60.
Panic had swept through stock markets worldwide earlier this week on fears that key global economies will enter recession.
On Tuesday, the US Federal Reserve made its biggest rate cut for 25 years to stoke up growth and bolster markets.
However, worries persisted that the move may have come too late, as many firms have already reported lower profits and a worsening business environment.
Fragile markets
News of the US government plan to inject capital into bond insurers gave fragile confidence in the financial sector a boost and sent shares in banks, including Citigroup and JP Morgan surging, while technology firms also gained.
You do have to rescue markets otherwise you would go into a depression, as you did in the 1930s


George Soros



Chill on Wall Street


The technology-heavy Nasdaq rose 1%, while the wider S&P 500 index also ended ahead, up 2.1%.
On Tuesday, the European Central Bank hinted it would not follow the Fed by slashing rates, and analysts said the Bank of England was unlikely to accelerate rate cuts.
Speaking to the BBC, billionaire investor George Soros said it was going to be difficult for the UK and US to avoid a recession, even after the Fed cut its main interest rate to 3.5% from 4.25%.
Mr Soros said he supported the US Federal Reserve's surprise interest rate cut, which bolstered global stock indexes.
"You do have to rescue markets otherwise you would go into a depression, as you did in the 1930s," he said.
Market movers
The UK's FTSE 100 index finished a nerve-wracking session 131 points, or 2.2%, lower at 5,609.3, erasing the gains it made on Tuesday.
Germany's Dax lost 4.9% at 6,439.21, while France's Cac 40 was down 4.3% at 4,636.76. So far this year, the FTSE 100 has lost more than 13% of its value, wiping about £225bn off the total value of the companies listed on the index. Germany Dax's index has been one of the worst hit in Europe, down almost 20% this year.

mystic_trev

IveSeenTheLight wrote: »

Not directly a link to the housing issue, but if the result of the interest cuts in the US manages to stabalise the market, will the UK follow suit and will this stabalise the markets in the UK

Really? So perhaps you'd like to explain this?

In a bid to inject some calm, the U.S. Federal Reserve surprised investors yesterday by slashing interest rates by an uncharacteristically high three-fourths of a percent -- a signal the Fed is worried the two-year slump in housing could push the U.S. economy into a recession.
As part of their decision, Fed officials said that "incoming information" indicates a deepening of the housing market downturn.
The Fed's move helped rescue the stock markets from a steeper sell-off, but it isn't expected to do much to help the housing slump. Experts expect another few years of steep price declines and foreclosures.

mystic_trev

.....and as you've quoted 'part' of what Gerge Soros said at Davos, let's put that in perspective.

George Soros, the man who spectacularly bid against the pound on "Black Wednesday" in 1992, predicted that it would be "very difficult" to avoid recession in both the US and the UK

http://www.guardian.co.uk/business/2008/jan/23/davos2008.useconomy

IveSeenTheLight

mystic_trev wrote:

Really? So perhaps you'd like to explain this?

I didn't mean this as a statement, this was a question.
Sorry to miss the question mark. I'll update

mystic_trev wrote: »

.....and as you've quoted 'part' of what Gerge Soros said at Davos, let's put that in perspective.
http://www.guardian.co.uk/business/2008/jan/23/davos2008.useconomy

No I only quoted the BBC News website, in full

Generali

Hmmm. The good news seems to be that so far policymakers are managing to avoid the mistakes that could lead to a 30s style depression.

IMO cutting rates deeply and quickly is a good policy response; one of the things that made matters worse in 1929 US and 1990 Japan was the false concern over inflation - the deflationary effects of a credit contraction led recession should easily squeeze out any inflation that's in the system right now. The next big fear has to be the trade stance of some of the US presidential candidates. The last thing the world needs now is protectionism but it plays well to people worrying about their jobs.

A recession will see share prices fall further. How much further is hard to say* but a total fall top to bottom of 20-25% for the index is probably a reasonable guess. Some stocks doing better than others within that of course.









*If I knew the answer I'd be on a beach in the tropics sipping mai tais with a couple of 20 year old Swedish contortionists not faffing about on the internet

mystic_trev

Generali wrote: »

Hmmm. The good news seems to be that so far policymakers are managing to avoid a mistake that could lead to a 30s style depression.

Hi Gen - That's what Soros says in his interview with 'Tinsel tits'

http://news.bbc.co.uk/player/nol/newsid_7200000/newsid_7204200/7204279.stm?bw=bb&mp=rm&asb=1&news=1&bbcws=1

Generali

Very interesting, top bloke Soros. A bit of a leftie for me (seriously - he likes market regulation probably because he's made so much cash from it!) but clearly a seriously bright lad.

I think he's basically saying what I am about the possible future (not that I claim to have a fraction of the brains or fortune of Mr Soros). Depression in the West if the policy makers eff it up, recession if they don't. What happens in the East depends on how they cope with export markets drying up. They should be ok but will take a hit in reduced growth rates.

Generali

Completely off topic (sorry) but this may be of interest to some:

http://news.bbc.co.uk/1/hi/business/7206270.stm

I contracted for Soc Gen for a bit. Doesn't surprise me in the least.

Generali

According to a mate of mine, that massive sell off in stock the stock markets was due to Soc Gen trying to unwind the $7,000,000,000 that they didn't know they had!

I have no idea if that's true or not, it's just a rumour.

mystic_trev

Does that mean the Trader will lose his bonus? :rotfl:

going2die_rich

The answer is no to both questions.