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World financial crisis

European, Japanese markets boosted by historic US interest rate cut

Article published on the 2008-12-17 Latest update 2008-12-17 11:36 TU

The Federal Reserve building(Photo: Reuters)

The Federal Reserve building
(Photo: Reuters)

Paris's Cac-40 jumped 1.64 per cent at opening Wednesday, with rises in London, Frankfurt and Tokyo, after the US Federal Reserve cut its base lending rate to a new historic low of zero to 0.25 per cent. The Fed promised further measures to stimulate credit and revive the crisis-hit economy.

The US central bank's Federal Open Market Committee lowered its target federal funds rate from one per cent, already a historic low, to a range of zero to 0.25 per cent.

This new attempt to encourage banks to lend to business and thus revive growth follows the example of Japan in the 1990s.

Japanese markets approved of the measure, ending up 0.52 per cent, although carmakers remained weak, their exports undermined by the yen's strength against the dollar. Honda and Nissan both lost over four per cent after reducing profit projections and production plans.

In London the FTSE rose 0.72 per cent, while Frankfurt's Dax index was up 0.82 per cent. The Cac-40 rise followed a 2.07 per cent increase Tuesday.

But there was bad news for leading French bank, BNP Paribas. Its share price fell 13.39 per cent to 35.81 euros, after announcing losses of 710 million euros in the first eleven months of this year.