Dollar slides against euro as German business confidence rises (AFP)
AFP - The dollar fell against the euro, primarily as the European currency benefitted from robust German business confidence figures, traders said.
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US steps up rescue plan amid recession storm clouds (AFP)
2008.10.1428 minutes ago
WASHINGTON (AFP) - The United States is to inject up to 250 billion dollars in capital into banks on Tuesday in the latest bid to end the financial crisis, officials said Tuesday as forecasters warned two key European economies risked recession.
After markets surged on the back of rescue packages in Asia and Europe, US Treasury Secretary Henry Paulson delivered his own shot in the arm by announcing nine large banks would give the government equity stakes in exchange for new capital.
The government also will temporarily guarantee bank debt and interbank lending and offer unlimited deposit insurance for many accounts.
The efforts are part of a 700-billion-dollar bank bailout approved last month by Congress. European nations announced their own 1.8 trillion euro (2.4 billion dollar) package on Monday after a weekend pledge by the world's wealthiest nations to use all available tools to save key financial institutions.
"Today's actions are not what we ever wanted to do -- but today's actions are what we must do to restore confidence to our financial system," said Paulson.
"Government owning a stake in any private US company is objectionable to most Americans -- me included. Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable."
The annnouncement comes after the unveiling on Monday of a series of bank rescue packages which in Germany alone included 400 billion euros (545 billion dollars) in loan guarantees and 80 billion euros in fresh capital.
The Bank of Japan also announced new steps on Tuesday aimed at thawing frozen bank lending, offering banks unlimited dollar funds, as it left its super-low interest rates on hold at an extraordinary meeting.
And Australia launched a 7.25 billion US dollar economic stimulus package Tuesday which Prime Minister Kevin Rudd said was intended to address concerns that the crisis was moving beyond dramatic losses in share values to pose a threat to his country's solid economic growth.
The announcements were a boon to the financial markets which plummetted throughout last week.
After experiencing the biggest rally Monday in 75 years, Wall Street shares kept momentum Tuesday as the Dow Jones Industrial Average leapt 355.79 points (3.79 percent) in the first trades.
The London stock market was up 6.0 percent around midday while its main European rivals rose by more than 5.0 percent.
Some of the shine from the renewed financial market confidence was rubbed off by downbeat data highlighted how the turbulence had affected jobs and growth.
A downgraded forecast from the Bank of France, which predicted growth would drop to minus 0.1 percent in the third quarter, showed the country was heading into recession after a 0.3 percent contraction in the previous three months.
And a group of economic think tanks in Germany said that Europe's biggest economy was likely to grow only at around 0.2 percent in 2009.
"In the autumn of 2008, the German economy is on the brink of a recession," the six institutes wrote in their latest economic outlook.
In London, figures showed Britain's inflation rate surged to a 16-year high point of 5.2 percent in September.
An editorial in London's Financial Times said the reaction of governments may work but said there should be no illusions about the extent of the troubles still ahead.
"The scale of the response is indicative of the depth of this financial crisis -- arguably the worst of the past century," it said.
Markets across the globe have been in a state of panic since the middle of last month when Wall Street investment bank Lehman Brothers filed for bankruptcy after the US government refused to bail it out.
Banks and other financial institutions across the world have been hit by bad debts stemming from the granting of so-called subprime loans to house-buyers in the United States who subsequently defaulted.
Evidence of the impact on jobs came as German automaker Daimler said it was to cut 3,500 jobs in the United States and Canada following a slump in demand, a day after Japan's Nissan announced 1,680 jobs were being axed in Spain.
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