Taking a bold step Fed has cut a key interest rate by three-quarters of a percentage point to stop panic stricken free fall of the world market. It is expected that European Central Banks would follow suit.
Fed rate cut is unprecedented in magnitude and in timing. Fed has taken this decision about 10 days ahead of the schedule meeting. The cut is even bigger than the step taken after 2001 terrorist attacks.
The rate cut has a great impact on the Asian Market but the US market reacted more cautiously. Although Dow Jones industrial average closed 128 points down at 11,972 and the NASDAQ dropped 48 points to 2,292, down fall is much less dramatic than the Asian pears on the same day.
Asian market today reacted very positive to the fed rate cut. At the time of writing the Hang Seng has rallied 1,452 points (6.8%) to 23,209. The Nikkei has surged 421 points (3.3%) to 12,994.The Straits Times index has advanced 79 points (2.8%) to 2,946, and the Seoul Composite index has added 22 points (1.3%) to 1,631. The Shanghai Composite index has gained 90 points (2%) to 4,650.
Indian market has also reacted positively to the rate cut. At 10.29 hrs IST, the Sensex is up 474.25 points or 2.83% at 17204.19, and the Nifty up 130.40 points or 2.66% at 5029.70. About 1102 shares have advanced, 1818 shares declined, and 62 shares are unchanged.
Despite such initial euphoria, the question is whether the rate cut would able to solve the problems of US Economy. It is true that the rate cut would definitely help consumer and industry to borrow money at lower rate and would fuel consumption and industrial expansion. But the question remained is how far the move would resolve the underlying credit crunch.
Some experts feel that proposed tax cut and another dose of rate cut during the scheduled Fed meeting next week would ease the situation and give time to the policy makers to resolve the core issues affecting the economy.
I remain cautiously optimistic about the rate cut as previous rate cuts triggered a similar euphoria at the market but that did not last long. My hunch for today is that at every rise there would profit booking and if market crosses 18,000 there would be an attempt of large scale profit booking and market may not able to sustain its initial gain by this evening. I would be happy to be proved wrong.
Fed rate cut is unprecedented in magnitude and in timing. Fed has taken this decision about 10 days ahead of the schedule meeting. The cut is even bigger than the step taken after 2001 terrorist attacks.
The rate cut has a great impact on the Asian Market but the US market reacted more cautiously. Although Dow Jones industrial average closed 128 points down at 11,972 and the NASDAQ dropped 48 points to 2,292, down fall is much less dramatic than the Asian pears on the same day.
Asian market today reacted very positive to the fed rate cut. At the time of writing the Hang Seng has rallied 1,452 points (6.8%) to 23,209. The Nikkei has surged 421 points (3.3%) to 12,994.The Straits Times index has advanced 79 points (2.8%) to 2,946, and the Seoul Composite index has added 22 points (1.3%) to 1,631. The Shanghai Composite index has gained 90 points (2%) to 4,650.
Indian market has also reacted positively to the rate cut. At 10.29 hrs IST, the Sensex is up 474.25 points or 2.83% at 17204.19, and the Nifty up 130.40 points or 2.66% at 5029.70. About 1102 shares have advanced, 1818 shares declined, and 62 shares are unchanged.
Despite such initial euphoria, the question is whether the rate cut would able to solve the problems of US Economy. It is true that the rate cut would definitely help consumer and industry to borrow money at lower rate and would fuel consumption and industrial expansion. But the question remained is how far the move would resolve the underlying credit crunch.
Some experts feel that proposed tax cut and another dose of rate cut during the scheduled Fed meeting next week would ease the situation and give time to the policy makers to resolve the core issues affecting the economy.
I remain cautiously optimistic about the rate cut as previous rate cuts triggered a similar euphoria at the market but that did not last long. My hunch for today is that at every rise there would profit booking and if market crosses 18,000 there would be an attempt of large scale profit booking and market may not able to sustain its initial gain by this evening. I would be happy to be proved wrong.
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