(Agencies)
Updated: 2008-01-23 20:34

On Wall Street Tuesday, the Dow Jones industrial average plunged more than 450 points initially but recouped most of its losses as the day progressed to close at 11,971.19, down 128.11 points, or 1.1 percent.

US stock index futures showed that Wall Street was poised for a modest drop Wednesday. Dow futures were down 40 points, or 0.3 percent, to 11,911. Standard & Poor's 500 futures were down 5.5 points, or 0.4 percent, to 1,303.8.

In Europe, where investors had a chance to cheer the Fed's cut the previous day, the UK's FTSE 100 was down 1 percent, while France's CAC 40 slid 0.9 percent and Germany's DAX was down 0.7 percent.

Investors in Asia were already factoring in another US rate cut of as much a half-point when the Fed holds its regular meeting on Jan. 29-30, traders said. But Asian markets could slide back if Wall Street continues to decline in coming sessions, they warned.

In Hong Kong, where the benchmark index had plunged 22 percent since the start of the year through Tuesday, investors took heart from the US rate cut and snapped up stocks that had fallen to attractive levels.

Francis Lun, a general manager at Fulbright Securities, estimated that the Hong Kong market had been oversold by about 15 percent.

"It's time to recover, but investors still need to be cautious because the fluctuation now is too big," he said.

The Fed's move initially helped the dollar, but later the US currency dropped to 106.31 yen from 106.48 yen Tuesday in New York.

Asian-based companies welcomed the Fed's move, too.

"Anything that helps consumer sentiment is good for our business," said Bruce Rockowitz, president of Li & Fung, a Hong Kong-based exporter that sources products for major brands and retailers worldwide, including Wal-Mart Stores Inc.

"From a psychological effect, it's given people in the US at least comfort that the government will do whatever they can to solve this crisis," he said.

Still, analysts warned that lower interest rates won't fix bad credit problems -- and usually take several months to have an effect on an economy.

"We consider the Fed's rate cut still insufficient for the global financial markets to completely recover and help the Japanese stocks to fully rebound," Credit Suisse chief strategist Shinichi Ichikawa said.

   1 2   

   1 2