U.S. Fed Cuts Prime Interest Rate; Asian Markets Rise

YURI KAGEYAMA writes:

TOKYO - Asian stock indexes rose sharply Wednesday, rebounding from steep losses in the previous two days after a surprise interest rate cut by the U.S. Federal Reserve.

Japan's benchmark Nikkei 225 index gained 423.82 points, or 3.37 percent, to 12,996.87 points on the Tokyo Stock Exchange in early trading. It had fallen 5.7 percent Tuesday — its biggest percentage drop in nearly 10 years — on fears of a recession in the U.S.

The Korea Composite Stock Price Index rose as much as 3.1 percent in the opening minutes of trading. The Kospi slightly pared gains to trade up 2.7 percent at 1,652.39 about 30 minutes into the session. The Kospi fell 4.4 percent Tuesday and 3.0 percent Monday.

European stocks fell sharply at their opening Tuesday, then rose in volatile trading ahead of the Fed's decision to cut its key rate to 3.5 percent from 4.25 percent, and rose even more afterward. The U.K.'s FTSE 100 finished up 2.9 percent at 5,740.10, while France's CAC 40 gained 2.1 percent to 4,842.54. In Germany, the DAX ended barely down, off 0.3 percent at 6,769.47, as utilities RWE and E.On fell but financials such as Deutsche Bank rose.

The surprise Fed move was aimed at fears that trouble in financial markets from the U.S. subprime crisis was spreading to the broader economy. Interest rate cuts tend to boost stocks. The Canadian central bank quickly followed, lowering its key rate by a quarter of a percent to 4 percent.

Pre-Presidential Election Economic Jitters

Not being an economist, the following is just speculation. Speculation? Hmm, seems speculation is a major part of the U.S. and World stock markets. Panic on the floors of the stock exchanges around the world. All due to what seems obvious to me: a trumped up tale of economic woe in the United States on the eve of a presidential election. Not to say that our economy is not in trouble; just that it has been in trouble for several years. No one seemed to get this excited about it, though. Now, just before our elections and during our primaries, everyone is talking about a possible recession. What weird timing. Why talk about something that has not happened in order to make it happen? Make it happen so that voters will turn out against the Republicans and vote for Hillary Clinton who keeps telling us that we are in trouble. I didn't notice that I was in trouble until she told me I was. Of course, Hillary isn't the only one telling us that we are in an economic downturn - heck - down spin as of yesterday! The world's gone mad with worry. And worry begets fear, and fear begets panic, and panic begets a worldwide economic slowdown. How bizarre is that?

Global Stock Markets Down Sharply

Associated Press reports:

TOKYO - Global stock markets extended their shakeout into a second day Tuesday, plunging amid worries that a possible U.S. recession will cause a worldwide economic slowdown.

The dramatic declines in Asia and Europe were expected to spread to Wall Street, where stock index futures were already down sharply hours before the trading day began.

Japan's Nikkei 225 index, the benchmark for Asia..., plummeted 5.7 percent to close at 12,573.05 on the Tokyo Stock Exchange, the lowest close since Sept. 8, 2005. In China, the Shanghai Composite Index fell 7.2 percent to its lowest close since early August.

World Markets Plunge

Fears that the United States is in a recession reverberated around the world on Monday, sending stock markets from Frankfurt to Bombay into a tailspin and puncturing the hopes of many investors that Europe and Asia will be able to sidestep an American downturn.