Fed cut gives UK shares a lift

Click to follow

Investors were in positive mood today as London's biggest companies extended yesterday's stock market gains.

The US Federal Reserve's 0.75 per cent interest rate cut last night - although smaller than the 1 per cent hoped for by some City watchers - sent Wall Street's Dow Jones Industrial Average soaring by more than 400 points.

The more upbeat sentiment after Monday's turmoil fed into Asian markets and London's FTSE 100 Index was 43.5 points higher at 5649.3 in early trading.

Credit crunch fears over the cash crisis and cut-price sale at troubled investment bank Bear Stearns sent markets plunging at the beginning of the week, but the Footsie is now trading at levels seen last Friday.

In Asia, Hong Kong's Hang Seng and Japan's Nikkei 225 indexes were both more than 2 per cent higher after the Dow's 3.5 per cent rally - its biggest percentage one-day rise for more than five years.

The Fed has now cut its main interest rate by 2 per cent in the first three months of this year - and 3 per cent since the credit crunch first erupted in global markets last August - as it attempts to rescue the world's biggest economy from the brink of recession.

But traders said the latest peak in the market turmoil could be short-lived as investors wait for a mild bounce-back from markets before heading to the exit.

Oliver Stevens, head of dealing at IG Markets, said: "It is unlikely that investors will see last night's rate cut as the flame that scares away the bear - rather, market participants will have their ears close to the ground waiting for their next sell signal."

Prime Minister Gordon Brown admitted that Britain was going through a "period of uncertainty" but said Labour had helped the economy through "tough times" in the past and would do so again.

He wrote in the Sun newspaper: "Our task is to steer a course of stability in uncertain times. When a major bank in America has to be rescued over a weekend and billions are wiped off share markets across the world, I understand that people are worried about the future."

Comments