EXPECTATIONS of lower interest rates gave shares an initial fillip, but it proved short lived. At one time Footsie was up 107 points, but in busy trading it relapsed to end 47.1 down at 5,167.6 as investors fretted over the US hedge-fund rescue and its impact on New York. Barclays, one of the banks aiding the fund, fell 35p to 1,065p.
Imperial Chemical Industries was the day's major casualty, off 37p to a seven-year low of 450p on worries that it may be forced to cut its dividend.
Derek Pain, page 23
JAPAN'S STOCKS recorded their steepest rise in three weeks after a surge on Wall Street boosted hopes of a US interest-rate cut.
"It's buying by association," said one manager. "It's not as if lower US rates will affect exporters' bottom lines any time soon, but some blue chips had been sold rather low and Wall Street provided an easy excuse to go back to them.''
The benchmark Nikkei 225 index rose by 415.97 points, or 3.02 per cent, to 14,205.78. The market was closed on Wednesday for a holiday marking the first day of autumn.
THE Hang Seng Index posted its biggest rise in two weeks, trading up 339.89 points, or 4.6 per cent, to 7,844. The advance was led by HSBC Holdings as hints of a US interest-rate cut spurred bank and property stocks.
Hong Kong rates track the US's as the currency is pegged to the US dollar, and lower local rates will encourage home purchases. "We're going to have a little rally,'' said Terence Mahony of TCW Asia. "The big question is: if the Fed does cut rates, how much will they cut it?''
SHARES CLOSED lower, brought down by heavy losses in the banking sector and a weaker Wall Street. The Xetra DAX closed at 4,611.34, down 111.62, while in floor trade, the DAX closed at 4,646.25, down 53.14.
News that UBS had called an afternoon press conference caused speculation that it concerned the default of the New York Capital Management hedge fund for which UBS acted as agent. "The potential ramifications of this had a negative effect on German banking stocks," a trader said.