Fed cut comes too late for markets

London: A surprise 75 basis point interest rate cut by the US Federal Reserve on Tuesday failed to shift sentiment in sour global stock markets, giving only a temporary shot in the arm.

The unscheduled policy easing knocked safe-haven government bonds and the dollar off session highs.

"The Fed has clearly emphasised the downside risks to growth and felt it needed to counteract this with an immediate 75 basis point move," said Matthew Sharratt, economist at Bank of America in London.

In New York, recession worries pushed stocks lower on Tuesday, but the decline was shallower than feared at first as an emergency interest-rate cut by the Federal Reserve helped ease investor fears and stabilise global markets.

Declines were fairly broad-based, with Procter & Gamble Co, the world's largest household products company, down 2.4 percent at $65.51, and Exxon Mobil, down 2.5 percent at $82.98, among the biggest falling shares in both the Dow industrials and S&P 500. Exxon Mobil is the world's largest publicly traded oil company.

But investors bought financial stocks, which benefit from lower borrowing costs, as well as retailers. The financial sector was among the S&P 500's major gainers, while retailers led gains on the Dow.

FTSE ends up 3 per cent

Britain's top share index rebounded 2.9 per cent on Tuesday after the hefty rate cut by the Fed propelled heavyweight financial stocks higher.

The FTSE 100 .FTSE closed up 161.9 points at 5,740.1 in a volatile session, having fallen as much as 4.3 percent earlier in the day. Volumes were at their highest level since October 2007.

The UK's blue chip index tumbled 5.5 percent on Monday, its largest daily loss since September 11, 2001, wiping nearly 77 billion pounds off the value of the index's constituent stocks. The FTSE 100 has lost 11 percent so far this year on concerns over the health of the US economy.

The FTSEurofirst 300 index of top European companies also finished the day higher.

European stocks rose over one per cent in the wake of the rate cut, before losing ground to be down 0.5 per cent by 1420 GMT. But they remain off the session two-year lows.

The rate cut came too late for Asian stock markets, which saw Japan's benchmark Nikkei drop 5.7 per cent - the worst one-day loss since the session after the September 11, 2001 attacks on the United States.

MSCI's main world stock index rebounded to almost flat after the cut, before reversing again to be down 1.2 per cent. But it remained well off an early 15-month low.