NYSE plunges despite interest rate cut

Two police officers and a firefighter ring the bell to open trading on the NYSE Keystone

The New York Stock Exchange has fallen sharply despite the decision by the US Federal Reserve to cut interest rates by half a per cent on Monday. The Dow Jones industrial average recorded its biggest ever one-day points loss, plunging below 9,000 points for the first time since December 1998.

The Dow ended the day down 684 points at 8,921 – a fall of 7.1 per cent. The Nasdaq composite index fell 6.8 per cent, losing 116 points to finish at 1,579.

The Fed’s rate cut on Monday, the seventh and largest this year, brought the borrowing rate down to three per cent. Analysts were predicting a cut ahead of the NYSE’s opening to calm jittery investors.

Announcing the move, the Fed indicated it was ready to make further cuts. It was followed by the European Central Bank, which cut its interest rate by half a percentage point to 3.75 per cent.

Meanwhile, in Switzerland, the Swiss National Bank announced that it was lowering îts key interest rate by half a percentage point. The margin of fluctuation of the London InterBank Offering Rate (Libor) is now fixed at 2.25 to 3.25 per cent.

The NYSE’s closure, which lasted nearly a week, was the longest shutdown since the 1929 stock market crash. Two hijacked jetliners destroyed the World Trade Center on Tuesday, leaving thousands feared dead.

US markets plummeted

While US markets plummeted, there was a positive response to the US rate cut from Europe’s stock exchanges. In London oil, drugs, banks and telecom shares helped to drive the FTSE 100 index up 143.2 points to 4,898.9 – a rise of 3.01 per cent on the day.

In Frankfurt the DAX index also rallied, closing up 118.57 points – or 2.88 per cent – at 4234.55. There was also no sign of the much-feared market collapse on the French CAC-40, which ended 2.71 per cent or 105.97 points higher at 4,015.46.

However there were few crumbs for comfort to be gleaned from the Asian stock markets as they registered more heavy losses. In Tokyo stocks plunged to a 17-year low on Monday. The Nikkei blue-chip index fell 5.05 per cent to its lowest level since December 1983.

Hong Kong’s Hang Seng Index also took a tumble, ending down 3336.1 points at 9,319.35 – a fall of 3.48 per cent.

Airlines under pressure

Airline and insurance stocks, two sectors at the front lines of immediate business loss, led the decline. Continental Airlines announced it was laying off 12,000 employees and warned it could file for bankruptcy as it and two other US carriers had to cancel a significant number of scheduled flights after last Tuesday’s attacks.

Shares in Swissair dropped by nearly 18 per cent, while British Airways, which had already hit a multi-year low last week shed less than one per cent. Shares in the German carrier Lufthansa fell by 4.2 per cent.

Closure of the exchange has cost upwards of $400 billion, according to the Securities Industry Association, which says US trading is worth about $100 billion a day, $43 billion of which is traded at the NYSE.

swissinfo with agencies