G.O.O.D

Source: Reuters

A tentative rebound in global stocks spluttered on Wednesday while euro zone government bond yields hit a three-year low as gloomy economic news highlighted the case for more aggressive interest rate cuts in Europe this week.

The euro stayed on the backfoot and oil held near a 3-1/2 year low a day before the European Central Bank, Bank of England and Sweden’s Riksbank are all widely expected to cut borrowing costs.

Supporting those expectations, economic reports on Wednesday showed the euro zone’s services economy fell deeper into recession in November than initially thought and inflationary pressures eased.

“This is a horrible survey across the board, showing that the euro zone service sector is being hit ever harder by the financial crisis, muted consumer spending and markedly weaker activity in key export markets,” said Howard Archer, economist at IHS Global Insight.

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Technorati Tags: European Central Bank, Bank of England, Riksbank

Source: FT.com

Central banks around the world announced a co-ordinated cut in interest rates on Wednesday, but the latest dramatic intervention to solve the global financial crisis had a limited impact on investor sentiment.

The US Federal Reserve, the European Central Bank, the Bank of England, and the central banks of Canada, Switzerland, Sweden and the United Arab Emirates all cut their main lending rate by 0.5 percentage points.

The People’s Bank of China also announced a rate cut of 0.27 percentage points. The Bank of Japan, which already has a main lending rate of 0.5 per cent, did not cut its rate, but expressed “strong support” for the other banks’ moves.

The Fed, ECB and Bank of England issued statements with identical explanations for the move, saying inflationary pressures had started to moderate, and the recent intensification of the financial crisis had “augmented the downside risks to growth”.

The joint action by the world’s leading central banks temporarily halted the slide in global stock markets and boosted the euro and sterling against the dollar but these gains began to unwind by the end of the trading day in Europe.

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