Rate cut hope lifts global shares

Shares have been very volatile in recent weeks

UK and other European shares have risen sharply, buoyed by growing expectations that central banks will cut interest rates further.

The UK's FTSE 100 index closed up 8.05%, and France's Cac 40 added 9.23%.

After European markets closed, the US Federal Reserve cut its key interest rate from 1.5% to 1%.

But in New York, the Dow Jones and S&P were down slightly after a volatile day of trading, with only the Nasdaq edging into positive territory.

At close of trade in Wall Street, the Dow Jones was down 0.82%, or 74.16 points, at 8990.96. The S&P 500 was down 1.11%, or 10.42 points, at 930.09 and the Nasdaq was ahead 0.47%, or 7.74 points, at 1657.21.

It follows an 11% jump on the Dow on Tuesday.

Earlier stock markets across Europe climbed higher, as indexes rose 9.4% in Madrid, 9.9% in Milan and 9.1% in Amsterdam.

Big bank stocks were among the day's top winners. Shares in Spanish lender Santander, the eurozone's largest bank by market capitalisation, rose 14.3%. Swiss banking giants UBS and Credit Suisse rose 15.2% and 11.4% respectively.

Germany's leading Dax index bucked the upward trend, however, closing down 14.8 points, or 0.3%, after a turbulent day's trading, during which shares in Volkswagen fell 45.3%.

Rate cuts

Many analysts expect the Bank of England and European Central Bank to follow the US lead and cut rates next week.

The optimism is fuelled by the prospect of rate cuts Nicole Sze, Bank Julius Baer

UK interest rates are currently at 4.5%, after the Bank of England cut them by half a percentage point earlier this month in a co-ordinated move with both the Fed and European Central Bank (ECB).

The ECB's interest rate for the eurozone stands at 3.75%.

FTSE 100 INDEX: 29 October 2008

*All Times GMT

Tuesday's jump in share prices on Wall Street inspired a 7.7% rise in Japan's Nikkei index on Wednesday, with the Japanese market also lifted by hopes of a rate cut in Tokyo.

"The optimism is fuelled by the prospect of rate cuts," said Singapore-based investment analyst Nicole Sze of Bank Julius Baer & Co.