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Last Updated: Monday, 20 August 2007, 23:30 GMT 00:30 UK
US stocks rise but jitters remain
Traders on the New York Stock Exchange
The markets remain nervous
US stocks have ended mainly higher, but concerns remain that a rise in bad debt could cause a wider financial crisis.

The Dow Jones industrial average rose 0.32%, to end the day at 13,120.29, while the Nasdaq added 0.14%. But the Standard & Poor's 500 index fell 0.03%.

European shares closed up, and London's FTSE 100 climbed 0.24%.

Steps by central banks to calm the market, including the surprise US move to cut a key interest rate on Friday, have helped stocks recover some ground.

The US Federal Reserve reduced the rate it applies to loans for banks by 0.5% to 5.75%

Brian Levitt, corporate economist at OppenheimerFunds said though the Fed's move had been helpful, it was not enough to eliminate all of the unease in the market.

Officially, the Federal Reserve is not scheduled to meet until 18 September. Some analysts argue that until then market jitters will remain.

But according to a report from Reuters, US Treasury Secretary Henry Paulson is set to meet with Federal Reserve head Ben Bernanke and Senate Banking Commitee Chairman Christopher Dodd on Tuesday to discuss recent market turmoil.

"There's a lot of uncertainties out there," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners.

"The question is if the Fed did enough to satisfy the markets. Wall Street will be relentless until they cut the fed funds rate."

The recent turmoil has stemmed from a sharp rise in US home loan defaults, triggering fears of a wider financial crisis.

JP Morgan Chase was one of the main losers on Monday, ending 1.1% lower but clawing back from a 3% drop earlier in the day. Citigroup closed 0.8%, also recovering slightly from a 1.8% loss in earlier trading.

US Republican senator Richard Shelby, a former chairman of the US Senate's banking and housing committee, warned that the crisis would worsen before things improved.

Some firms would "not survive" the current volatility and some rates on certain sub-prime loans were set to increase, he said.

Housing slow-down

The recent market volatility has been prompted by a wave of mortgage defaults in the US as the housing market slowed dramatically after a series of interest rate rises that have made paying back loans more expensive.

Earlier on Monday, US lender Thornburg Mortgage said it had sold $20.5bn of assets.

The firm, which has been severely hit by credit problems, said it had offloaded billions of dollars worth of mortgage-backed securities in an attempt to better its financial position.

Financial shares have been hard hit due to the huge liabilities of banks and other financial firms linked to the unstable sub-prime mortgage sector.

The sub-prime sector makes loans to high-risk individuals and charges them higher rates of interest.

The sector boomed when thousands of people took out loans during the housing boom that petered out in early 2006.


FTSE 100
23.70 0.44%
19.54 0.34%
Cac 40
14.48 0.38%
Dow Jones
78.53 0.76%
35.31 1.58%
S&P 500
11.22 1.02%
BBC Global 30
20.65 0.36%
Data delayed by at least 15 minutes

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