All eyes will be on Wall Street later today, as markets further east began the fightback from Monday’s share rout. The Federal Reserve’s rate cut of three quarters of a percent was the largest for more than 20 years, in an attempt to kickstart the US economy. The White House and Congress are also speeding up their work on tax breaks and other measures in the hope of warding off looming recession.
There’s a brighter atmosphere in Europe as well, as London and Paris rebounded, although Frankfurt remained downbeat. Trader Dirk Mueller said many fear the rally may only be temporary.
“It just shows how desperate these guys are, and how dramatic they see the situation,” he said. “We have a profound structural problem with the world’s economy. What will an interest rate cut of three quarters of a point, or one point, do? That’s only a drop in the ocean.”
In London, the Bank of England predicted a tough twelve months ahead, perhaps the rockiest ride for ten years.
Asia continued the rally this morning; Tokyo surged nearly three and a half percent, while Australian stocks followed their worst day in 25 years by jumping more than six percent.
Relief for the time being, but America’s subprime credit binge means 2008 is suffering a draining New Year hangover.