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Thursday 13th of December 2007

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New York markets decline after rate cut

by Elaine Frei
December 11, 2007
New York markets decline after rate cut

Wall Street saw declines in mid-afternoon trade after the Federal Reserve handed down its key funds rate by a quarter point to 4.25 percent. The markets fell, according to at least one analysts, because investors were disappointed that the rate cut wasn’t bigger. Shortly after the decision was announced, the Dow Jones Industrial Average fell 1.53 percent to 13,516.49 while the Nasdaq composite was down 1.81 percent to 2,669.72 and the S&P 500 dropped 1.84 percent to 1,488.09.

Asia-Pacific equities markets were higher on Tuesday on hopes that the US Federal Reserve will cut US interest rates when it meets today and that the rate cut will energize the US economy. The Shanghai Composite added 0.25 percent to 5,175.08, while Taiwan’s Taiex index was up 0.47 percent to 8,638.33. In Australia, the Sydney Ordinaries gained 0.78 percent to 6,738.1 and the S&P/ASX200 was 0.83 percent higher to 6,680.4. The Kospi index added 0.98 percent to 1,925.07 in South Korea. In Singapore, the Straits Times index was up 1.01 percent to 3,589.03 while the Sensex was 1.81 percent higher in India and Hong Kong’s Hang Seng index jumped 2.55 percent to 29,226.84.

Besides the rate-cut hopes that boosted markets in the rest of the region, Tokyo’s markets were higher after Swiss bank UBS (SWX: UBSN; NYSE: UBS; TYO: 8657) said it will receive capital injections from Asia and the Middle East that will balance out the write downs it had to take due to exposure to the US subprime mortgage market. The Nikkei 225 added 0.76 percent to 16,044.72 while the Topix index was up 0.55 percent to 1,567.02 and the Mothers market gained 0.38 percent to 877.81.

European markets were mixed but mostly lower after investor confidence in Germany fell to its lowest level in nearly 15 years. The FTSE Eurofirst 300 dropped 0.44 percent to 1,540.52. While Madrid’s IBEX added 0.37 percent to 15,890.5, the Dax was down 0.3 percent to 8,009.42 in Frankfurt and the CAC-40 fell 0.45 percent to 5,724.76. Markets were mixed in London as well, with the FTSE 100 down 0.43 percent to 6,536.9 but the FTSE 250 adding 0.17 percent to 10,647.9.

Crude oil prices rose, while precious metals prices were up but base metals and grains prices were mixed.

Before the US Federal Reserve issued its decision on interest rates the US dollar was weaker, while the euro weakened on decreased investor confidence in Germany but sterling gained on a reduced goods trade deficit.

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