Asian shares rally on Fed rate cut

19 March 2008

Shares in Asia have rallied over night in response to the 0.75 per cent interest rate cut in the US instigated by the Federal Reserve.

The move to cut rates helped the Nikkei up 2.5 per cent while shares in Australia rose four per cent.

The main Indian and South Korea indices rose by two per cent.

A rate cut by the Fed was in response to the fears generated by the firesale of Bear Stearns to JP Morgan and an attempt to increase liquidity in the financial markets.

The latest reduction means that in six months the Fed has cut its federal funds rate from an annual 5.25 per cent to 2.25 per cent

Joseph Balestrino, fixed income market strategist at Federated Investors told the Telegraph: "The reality is that [the cut] is a lot on a historical basis.

"They are certainly still on the hunt to fix this thing. The worst is behind us. The reality is with a lag in monetary policy we haven't even seen the beneficial effects of the previous cuts."

In a statement the Fed did not rule out further cuts and said "financial markets remain under considerable stress".

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development