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November 3, 2008    

Economies announce rescue packages, shares rise

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by Kay Murchie

Global shares have risen today on the back of Government intervention after South Korea has become the latest country to announce a stimulus package to boost its economy.

The package, worth around 14 trillion won (£6.6 billion, $10.9 billion), has been announced by the Ministry of Strategy and Finance in a bid to stave off a recession.

Eleven trillion won is to be pumped into public projects, while three trillion won is for tax cuts to boost spending.

The South Korea rescue follows last week’s announcement from Taro Aso, Japan’s Prime Minister, who revealed a second stimulus package for the country.

Japan’s 5 trillion yen (£31 billion, $51 billion) package is an attempt to stimulate the world’s second largest economy and include tax cuts, funding for care of children and the elderly and loans for small businesses.

The package is Japan’s second in as many months after the Prime Minister revealed a stimulus package worth 11.7 trillion yen at the end of August.

As a result, London’s FTSE 100 gained 0.8%, Germany’s Dax rose 1.3%, while France’s CAC rose 0.4%.

The European gains follow those in Asia after the MSCI index in the Asia-Pacific region rose 5.1%. Hong Kong’s Hang Seng index added 3% on the expectation that lending restrictions would been lifted, boosting small firms.

Meanwhile, India’s Sensex gained 4.6%. Banks led the gains in Asia and Europe.

Central banks in the US, Japan and China have all cut interest rates in the last week in a bid to boost their economies.

Many analysts believe that the Bank of England and European Central Bank will follow suit later this week.

The Bank of England has been under severe pressure of late to cut interest rates further. UK interest rates currently stand at 4.5% after the Bank of England cut them by 0.5% last month in a co-ordinated move with other central banks.

However, the Bank has been accused of leaving it too late in order to fight off a recession and is being urged to make aggressive cuts to avoid a prolonged recession.

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