Thursday, October 15, 1998 Published at 22:24 GMT 23:24 UK
Business: The Economy
Rate cut spurs huge rally
The New York Stock Market had its third biggest gain ever
US shares staged a massive rally, gaining more than 330 points after the US Federal Reserve Bank cut interest rates by another 0.25%.
It was the third biggest gain on the Dow Jones Industrial Average in history.
The move indicated that the the central bank is still very concerned about the turbulence on financial markets, which is threatening to dry up credit to companies and depress the economy.
The news came in the last hour of trading on Wall Street after the market had already staged a mini-rally as corporate earnings figures cheered the market.
But the Dow Jones shot up by more than 150 in a few minutes after the move was announced.
It ended the day up at 8299, up 330 points or 4%.
The highest ever gain in one day was 380 points.
Other measures of market performance also showed spectacular gains.
The broader based S&P 500 rose 41.97 points to 1047.50.
And the technology-heavy NASDAQ stock market was up 70 points to 1611, an even bigger gain.
Shares in the financial sector, which have been battered over the summer, were the biggest gainers.
Citigroup, Chase, and JP Morgan were all up by more than 10%. Big brokerage houses like Merrill Lynch also saw huge rises.
One of the reasons the Fed acted was the fear that the losses by the big banks in emerging markets could dry up credit for the economy as a whole.
In Europe, which closed before the US rate cut was announced, dealing had been directionless for most of the day, with investors not knowing which way to turn.
London's FTSE 100 eventually finished off earlier highs after early optimism in New York rubbed off on investors.
The index finished 17 points higher at 5056.
Frankfurt shares had a more positive day's trade. The leading index, the Dax, finished up 80 at 4,399.
Paris's Cac 40 closed just a point higher 3362.
In London, the telecommunications and banking sectors were among the brightspots.
The mood in Tokyo had been still depressed because of Japan's ongoing banking crisis.
The Nikkei index fell slightly slipping below the 13,000 level, closing down 75 at 12,995 points.
Shares in Nomura Securities plunged on rumours that it had suffered large investment losses.
Incredibly, the Nikkei has now shed 60% of its value since 1989 when it peaked at 33,000.
Asia's other big market, Hong Kong, saw shares in more positive mood.
The Hang Seng closed 130 points higher 8970.
Dealers said overseas funds had jumped to buy shares when the index hit low levels.
But they said the market was largely directionless as bad news about some local companies as well as uncertainty about the possibility of interest rate cuts in Hong Kong curbed further gains.
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