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Wednesday, 21 March, 2001, 21:03 GMT
US leads fresh share falls
The Nasdaq Big Board in Times Square, New York
The rate cut failed to lift investor spirits
The Dow Jones Industrial Average, reflecting the value of America's 30 biggest companies, is sharply lower, dashing hopes that Tuesday's interest rate cut would bring a swift end to its downward march.

The past year has seen share values slump across the world, largely because of worries about the slowdown of the US economy and the realisation that profit expectations for many internet related firms were unrealistic.

Markets
2050 GMT
London's FTSE 100:
5,541
Down 1.8%

Paris Cac-40:
5,023
Down 2.2%

Frankfurt Dax:
5,622
Down 2.8%

US Dow:
9,496
Down 2.3%%

US Nasdaq:
1,835
Down 1.2%
Interest rates in the US were cut by 0.5% on Tuesday in an effort to stimulate life in the economy which has slowed sharply since the autumn of 2000.

The cut, intended to persuade consumers to borrow and spend and companies to borrow and invest, was the third 0.5% reduction this year.

But despite the chunky cut, many traders in New York had decided they wanted to see a 0.75% cut to spark revival in the faltering economy.

That disappointment appeared to be the cause of a huge slump in share values after the rate cut decision on Tuesday, with few signs that a night's sleep had changed views.

The numbers

At 2050GMT on Wednesday the Dow was down 224 points to 9,496.

New York's Nasdaq market, dominated by the ravaged tech firms, was also down, by 22 points, to 1,834.

Market losers
Colt Telecom
down 11.3%
BT
down 5.4%
Energis
down 12.9%
Logica
down 10.1%
Reuters
down 10%
Royal Bank of Scotland
down 6%
France Telecom
down 7%
Deutsche Telecom
down 5.2%
Cap Gemini
down 8.9%

In the past year more than $3,500bn has been wiped off the value of shares listed on the Nasdaq stock market in the US.

The falls provided no relief for Europe, where London's benchmark FTSE 100 ended at a new 27-month closing low on Wedenesday, losing 106 points as telecom and technology shares took a fresh beating.

The FTSE 100 ended at 5,540.7 points, 1.8% down, at its lowest since 14 December, 1998.

At the same time, France's Cac-40 index dropped 115 points to 5023 and Frankfurt's Dax lost 160 points to close at 5622.

The falls reflect the feeling of US investors that Tuesday's cut in interest rates was not sharp enough.

US falls

Traders hammered the Dow and Nasdaq on Tuesday. The Dow closed down 238 at 9,720 and the Nasdaq finished down 4.8% at 1,857.

Both are at levels last settled at back in 1999 or before.

The only bright spot in global markets on Wednesday was Japan, where the Tokyo Nikkei index, surged after months of financial misery.

The index rose just under 913 points, or 7.5%, to close at 13,104 after a day of frantic activity that signals its biggest one-day gain in three years.

The markets were responding to the Bank of Japan's decision to cut interest rates to zero, shrugging off the heavy losses suffered in the US, where an interest rate cut did not live up to expectations.

The confidence of Japanese investors is attributed to a new-found belief that both the government and the Bank of Japan (BoJ) are finally getting serious about combating the nation's financial difficulties.

Tokyo's buoyancy was not mirrored elsewhere. In Hong Kong, the Hang Seng index lost more than 250 points to trade at just under the 13,000 points level.

Clearing up bad-debt

Wednesday trading was the first chance for investors to react to the BoJ's decision to return to its zero interest rates policy, after a public holiday on Tuesday.

The cut makes it cheaper for companies and consumers to take out loans and raised hopes that banks will soon take measures to clean up their bad-debt mountains.

Old economy stocks - such as traditional retailers - were amongst the rising stocks, boosted by a slight recovery in consumer sentiment.

And key blue-chip firms such as Toyota Motor Corporation, and Telecoms firm NTT DoCoMo also helped fuel the rise.

Another factor was the continued weakening of the yen against the US dollar, which should be positive for the country's exporters.

But despite Wednesday's surge, the Tokyo stock market is still bouncing along the bottom of a 15-year low.

And the markets have a long history of interest rates being at zero - which makes experts suspect that the impact on share prices will be limited.

Another reason why the market's recovery could be a short-lived is the fact that many banks are trying to improve their books in the run-up to the end of the financial year.

As they try to make their balance sheets look better, some do attempt to boost share prices in the last few weeks of March, according to analysts in Tokyo.

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The Markets: 9:29 UK
FTSE 100 5760.40 -151.7
Dow Jones 11380.99 -119.7
Nasdaq 2243.78 -28.9
FTSE delayed by 15 mins, Dow and Nasdaq by 20 mins

Analysis

Economic slowdown

Background

TALKING POINT
See also:

21 Mar 01 | Business
US inflation higher than expected
20 Mar 01 | Business
Q&A: Why do interest rates matter?
21 Mar 01 | Business
Japanese stocks surge
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