01/18/2008

News / Markets shrug off recession woes

Global markets made ground in volatile Friday trading - despite continuing fears of a US recession.
Observers said markets - which tumbled on Thursday - were optimistic that President George W Bush would propose measures to bolster the US economy.

US markets moved ahead in early trade while key London, Paris and Frankfurt markets also rose.

However, analysts warn that a rebound may be short-lived unless there are signs that global growth is picking up.

On Thursday, weak manufacturing data and bad news from Merrill Lynch, reporting the biggest quarterly loss in its history, caused the main US Dow Jones index to fall 2.46% or 306.95 points to 12,159.21.

However it began to claw back ground on Friday, up 1%, or 126.7 points, in the first half hour of trading, while the Nasdaq index gained 0.9%.

Moving target

Share trading was likely to remain volatile until more evidence emerged about the lasting impact of US housing market problems and whether any emergency measures would lift the world's biggest economy, analysts said.

"You've got a real headwind in the form of scepticism about the market's ability to deliver stronger earnings," said Richard Urwin of investment firm BlackRock.

"Against that, you've got a very difficult background discounted and the potential for things not to be as bad as investors have come to believe."

Japan's Nikkei 225 index closed 0.6% higher, having been 3% down earlier.

It ended at 13,861.29 points while Hong Kong's Hang Seng index also recovered from a 3.7% early slump to finish Friday trading up 0.4% at 25,201.9 points.

However, India's Sensex fell 3.5% to close at 19,013.7 points.

London's FTSE 100 added 80.5 points, or 1.4%, while France's Cac index and Germany's Dax both put on 0.4% by mid-afternoon trading.

Recovery package

Later on Friday, President Bush is set to make his first public call for emergency legislation to stimulate the flagging economy.

A White House spokesman said the president would "let the American people know that he does believe that short-term temporary measures are needed to help the economy through this period".

Federal Reserve chairman Ben Bernanke has backed the introduction of emergency measures aimed at helping the US economy avoid recession.

Speaking to the House Budget Committee Mr Bernanke said that any measures such as tax cuts should happen quickly, and on a temporary basis to be effective.

"Stimulus that comes too late will not help support economic activity in the near term, and it could be actively destabilising if it comes at a time when growth is already improving," he warned.

Analysts said that the president's announcement would be watched by the markets with interest.

"Whether the stimulus package will be sufficient or not, we don't know at this point, but how deep the US slowdown is will be the more critical part," said United Overseas Bank analyst Suan Teck Kin.

Source: http://news.bbc.co.uk/2/hi/business/7195372.stm

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