The US Federal Reserve has just announced a 0.5% point cut in interest rates in what is a concerted move to prop up trading on Wall Street today. The cut, from 3.5% to 3.0%, came only one hour before trading is set to resume.
Investors around the world will still be looking anxiously toward Wall Street, as trading there opens again for the first time since last week’s terrorist attack on the United States. Wall Street is effectively the bellwether of the global markets and stock there has not been traded now for four days.
Today’s markets are therefore likely to be very volatile, although interest rate cut should offer a great and unexpected boost to confidence.
For media companies, the whole situation is now looking more bleak than the climate of impending recession which was already in place even before the tragedy in the US. Advertising levels are likely to drop as media devote much of their space to coverage of the events now unfolding in the States and around the world (see Forecasts).
More generally, the South China Morning Post reports that analysts are expecting a fall of anything between 5 and 10% when the New York Stock Exchange opens today, although these estimations came before the rate cut news.
On Friday the US Securities and Exchange Commission decided to relax regulations on company ‘buy-backs’ for one week. Buy-backs allow companies to buy their own stock, therefore reducing the number of shares in circulation which in turn increases demand and prices.
Brokers and investor advisers have been urging investors to ‘buy American’ in a financial act of patriotism that should help stabilise the markets. In reality, only business buy-backs and bargain hunters are likely to be acquisitive today.
Comment Last week’s disaster in the US could not have come at a worse time. The economy there was already experiencing its most severe period of retraction in ten years. There are real fears now that the economic knock-on effect of the devastating attacks in New York and Washington could tip us into a global recession.
