Rate cuts fail to cheer markets

Stocks have fallen sharply after co-ordinated interest rate cuts by major central banks failed to dispel the gloom engulfing world markets.

On Wall Street, the Dow Jones ended 189.01 points lower, or 2%, at 9,258.1 despite having risen in earlier trade.

European stock markets ended deep in negative territory, with London's FTSE 100 down 5.18%, France's Cac 40 6.3% lower and Germany's Dax losing 5.9%.

Investors were unconvinced that the move would solve the financial crisis.

The Bank of England, the European Central Bank (ECB) and the US Federal Reserve have all reduced their key rates by half a percentage point.

The Bank of England cut UK rates from 5% to 4.5%, the Federal Reserve reduced US rates from 2% to 1.5%, and the ECB cut eurozone rates from 4.25% to 3.75%.

"We are not out of the woods yet," said Joshua Raymond, market strategist City Index .

"We will have to see whether this has any long lasting effect on confidence."

"We have not yet turned the corner in this financial crisis"
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Other key developments on another day of market turbulence have included:

• The UK government has announced a package of measures aimed at rescuing the banking system that makes available £400bn ($692bn) of fresh money.
• US Treasury Secretary Henry Paulson said that more financial firms were expected to fail in the US despite a $700bn government bail-out programme.
• The British government said all UK savers with accounts in the closed Icelandic internet bank Icesave would get all their money back.
• Italy also unveiled details of a banking rescue plans that will involve the government taking stakes in failing banks.
• ING Direct announced it was acquiring more than £3bn of deposits held by British savers with Icelandic-owned banks Kaupthing Edge and Heritable Bank
• Austria and Hungary became the latest countries to fully guarantee savers' deposits

'Thumbs down'

The other central banks that took part in the co-ordinated rate cut were those in Canada, Sweden, and Switzerland. China also reduced its interest rates, the second time it has cut its key rate in less than a month.

"The co-ordinated interest rate cuts got the 'thumbs down' from equity markets, suggesting we have not yet turned the corner in this financial crisis," said analysts at Capital Economics.

Earlier in Asia, Japan's Nikkei had closed down 9.4% at 9,203, its lowest finish since June 2003.

Hong Kong's Hang Seng index closed 6.2% lower. India's main index fell 8% at one point but eventually closed down 4.3%.

Markets in Australia, China and Taiwan were among other fallers.

Russia's Micex exchange has suspended trading until Friday, after the index dropped more than 14% in the first half-hour of trading.