World equities rally after U.S. interest rates slashed

Global stock markets staged a spirited fightback after a shock U.S. interest rate cut However, analysts warned that fears of a U.S. recession had not gone away. World equities rally after U.S. interest rates slashed Equity markets had suffered fierce losses in recent days in the face of mounting concerns that a slowdown in the world's biggest economy could spread around the world. However, the U.S. Federal Reserve's steep 75-basis-point cut on Tuesday spurred markets to bounce back from a two-day bloodbath. In Asia on Wednesday, Hong Kong shares rocketed by an astonishing 10.7 percent, wiping out Tuesday's record plunge, while Tokyo closed up two percent. In European early morning deals, Frankfurt, London and Paris markets also aimed higher. "It's something of a relief rally," said Hargreaves Lansdown analyst Richard Hunter in London on Wednesday. "Obviously it's been helped along by the Fed's decision to cut interest rates by three quarters of a percent, outside of its usual meeting. "That has led in the U.S. to speculation that at their actual meeting next week there could be another quarter of a percent cut on that, maybe even a half." Traders and analysts remain on red alert over U.S. recession fears, despite the encouraging gains in equities. "There are still concerns around a potential U.S. recession, there are also concerns around a potential UK slowdown," Hunter said, adding that the FTSE 100 was down by 10 percent in value so far this year. "The other thing to add into the mix is the continuing fallout from the U.S. subprime crisis." Wednesday's gains came on the heels of the first unscheduled interest rate cut by the Fed since just after the September 11, 2001 attacks in the United States, as the U.S. central bank moved to stop a global rout on the markets. But there were immediate signs that the cut might not be enough to restore investor confidence, which has been badly shaken by worries about the longer-term health of the U.S. economy. In London on Wednesday, the FTSE 100 index of leading shares reversed initial gains to swing briefly into the red. The FTSE later stood up 0.14 percent at 5,748.10 points. The Paris CAC 40 index soared more than two percent at the open but pared gains to stand 0.47 percent higher at 4,865.37. Frankfurt's DAX 30 rose 0.73 percent to 6,818.75 points. In Asia, meanwhile, Hong Kong's key Hang Seng index chalked up the biggest one-day point gain in its history, closing up 10.7 percent at 24,090.17 points. That wiped out Tuesday's record plunge, as interest rate cuts salvaged investor confidence, dealers said. "Markets are feeling slightly more reassured now that the Fed cut rates and is expected to cut rates again next week," said Hirokazu Fujiki, equity strategist at Okasan Securities. Tokyo and Seoul both pared back solid early jumps, finishing up 2.04 percent and 1.2 percent respectively on Wednesday. Shanghai leapt 3.14 percent and Sydney jumped 4.4 percent. "Buyers are coming back into the market looking for opportunities, though we shouldn't get too carried away as volatility is with us to stay," added Michael Heffernan, a private client adviser at Austock in Sydney. Subprime credit woes and a housing slump have added to investor concerns that the U.S. economy will shrink in the months ahead. In its online edition, the Economist magazine said the huge and unexpected cut by Federal Reserve chief Ben Bernanke had a "whiff of panic" about it and that market sentiment appeared to be shifting for the worse. "The size of the cut also brings more fear than comfort," it added. The U.S. economy has been hit by rising mortgage defaults by "subprime" customers who were issued loans during the last housing boom despite patchy credit histories.

World equities rally after U.S. interest rates slashed

Equity markets had suffered fierce losses in recent days in the face of mounting concerns that a slowdown in the world's biggest economy could spread around the world.

However, the U.S. Federal Reserve's steep 75-basis-point cut on Tuesday spurred markets to bounce back from a two-day bloodbath.

In Asia on Wednesday, Hong Kong shares rocketed by an astonishing 10.7 percent, wiping out Tuesday's record plunge, while Tokyo closed up two percent.

In European early morning deals, Frankfurt, London and Paris markets also aimed higher.

"It's something of a relief rally," said Hargreaves Lansdown analyst Richard Hunter in London on Wednesday.

"Obviously it's been helped along by the Fed's decision to cut interest rates by three quarters of a percent, outside of its usual meeting.

"That has led in the U.S. to speculation that at their actual meeting next week there could be another quarter of a percent cut on that, maybe even a half."

Traders and analysts remain on red alert over U.S. recession fears, despite the encouraging gains in equities.

"There are still concerns around a potential U.S. recession, there are also concerns around a potential UK slowdown," Hunter said, adding that the FTSE 100 was down by 10 percent in value so far this year.

"The other thing to add into the mix is the continuing fallout from the U.S. subprime crisis."

Wednesday's gains came on the heels of the first unscheduled interest rate cut by the Fed since just after the September 11, 2001 attacks in the United States, as the U.S. central bank moved to stop a global rout on the markets.

But there were immediate signs that the cut might not be enough to restore investor confidence, which has been badly shaken by worries about the longer-term health of the U.S. economy.

In London on Wednesday, the FTSE 100 index of leading shares reversed initial gains to swing briefly into the red. The FTSE later stood up 0.14 percent at 5,748.10 points.

The Paris CAC 40 index soared more than two percent at the open but pared gains to stand 0.47 percent higher at 4,865.37. Frankfurt's DAX 30 rose 0.73 percent to 6,818.75 points.

In Asia, meanwhile, Hong Kong's key Hang Seng index chalked up the biggest one-day point gain in its history, closing up 10.7 percent at 24,090.17 points.

That wiped out Tuesday's record plunge, as interest rate cuts salvaged investor confidence, dealers said.

"Markets are feeling slightly more reassured now that the Fed cut rates and is expected to cut rates again next week," said Hirokazu Fujiki, equity strategist at Okasan Securities.

Tokyo and Seoul both pared back solid early jumps, finishing up 2.04 percent and 1.2 percent respectively on Wednesday.

Shanghai leapt 3.14 percent and Sydney jumped 4.4 percent.

"Buyers are coming back into the market looking for opportunities, though we shouldn't get too carried away as volatility is with us to stay," added Michael Heffernan, a private client adviser at Austock in Sydney.

Subprime credit woes and a housing slump have added to investor concerns that the U.S. economy will shrink in the months ahead.

In its online edition, the Economist magazine said the huge and unexpected cut by Federal Reserve chief Ben Bernanke had a "whiff of panic" about it and that market sentiment appeared to be shifting for the worse.

"The size of the cut also brings more fear than comfort," it added.

The U.S. economy has been hit by rising mortgage defaults by "subprime" customers who were issued loans during the last housing boom despite patchy credit histories.