Markets shrug off rate cuts

An emergency round of interest rate cuts and governments' support for ailing banks won only muted market support, as most bourses worldwide continued their downward spiral yesterday.

There was little sign that Wednesday's rate cuts had unlocked money markets. Three-month borrowing on inter-bank markets remained expensive near this week's highs across all currencies, and lending beyond a week or two remained frozen, traders said.

The benchmark Shanghai Composite Index closed down 0.84 percent, falling for the fourth consecutive day, despite government moves to cut interest rates and the reserve requirement ratio for commercial banks on Wednesday.

In Tokyo, the Nikkei average closed down half a percent yesterday, after declining 9.4 percent a day earlier.

But Hong Kong's Hang Seng index recovered from Wednesday's 8 percent plunge, rising 3.3 percent.

European shares extended their slide yesterday to fall as much as 2.9 percent to their lowest level since November 2003, as banks and oil shares turned negative and Wall Street extended losses.

Major Wall Street stock indexes fell between 0.4 and 1.7 percent, reversing an early rally as financials slid.

The Federal Reserve on Wednesday cut its target for the benchmark rate on overnight loans between banks to 1.5 percent. The cut from 2 percent took the rate to its lowest level in more than four years.

In an unprecedented coordinated move, central banks in China, England Canada, Sweden and Switzerland and the European Central Bank also cut rates.

But the financial crisis seems to continue worldwide.

In Reykjavik, Iceland suspended trading on its stock exchange for two days and took control of the country's largest bank - the third to be placed under its protective umbrella - yesterday as it grappled with a banking crisis that is threatening to engulf the entire country.

The Nordic nation's government also used sweeping new emergency powers to create a new bank that will take over the bulk of the domestic operations of another one of its collapsed banks.

The country is struggling to get a grip on the collapse of its top-heavy banking system, a situation that Prime Minister Geir H. Haarde has warned is putting Iceland at risk of "national bankruptcy".

The government's decision to take control of Kaupthing, the country's leading bank, which has assets and debt across the continent, means that the Financial Services Authority now has control of all three of the country's major banks. The other two, Landsbanki and Glitnir, are in receivership.