INVESTORS GET SOME LIGHT RELIEF FROM US BANKS' RESULTS - Last night the US Federal Reserve cut its key lending rate by three quarters of a point. Two big US investment banks also published quarterly results yesterday which, despite reporting heavy losses, gave the markets some grounds for optimism.
Eugene Kiernan, of AIB Investment Managers, says that the US Federal Reserve had signalled a major cut in rates, so markets had factored the cut in. He says when one considers that in December US interest rates had stood at 4.5% and today they are just 2.25%. He says this is the most aggressive the Fed had been in over 20 years.
The key drivers behind the stock market gains were the better than expected figures from US investment banks Goldman Sachs and Lehman Brothers, Mr Kiernan states. He says that though profits at both banks were low, they were not as low as some analysts had feared, while the writedowns they had to take were in line with expectations. Most important of all, however, the two banks showed that they had cash on hand to fund day to day activities. This is in contrast to Bear Stearns, who had no funds to rely on. Mr Kiernan says the market is very much focused on short term liquidity and it will be again today when Morgan Stanley bring out their quarterly figures.
Mr Kiernan says that European markets are today set to consolidate their strong gains from yesterday. Most European markets ended more than 3% higher yesterday.
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MORNING BRIEFS - Japanese high-tech giant Toshiba has cut its profit forecast for the year by about 30% after admitting defeat in the high-definition DVD format war. Toshiba announced last month it would withdraw from the high-definition DVD business, clearing the way for the Blu-ray format developed by Sony and its partners to become the industry standard for next-generation discs.
*** French banking giant BNP Paribas said today that it had dropped any idea of a bid for Société Générale, another leading French bank rocked earlier this year by the biggest-ever rogue trading scandal.
*** On the currency markets, the euro is worth $1.5715 US cents and 78 pence sterling.
