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MARKETS PLUNGE AMID GROWING RECESSION FEARS

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MARKETS PLUNGE AMID GROWING RECESSION FEARS

Post  Panda on Thu 22 Sep - 17:21

Markets Plunge Amid Growing Recession Fears





4:41pm UK, Thursday September 22, 2011

The FTSE 100 has lost more than £64bn of its value - as investors signal a
lack of confidence in the world's ability to avoid a new recession.











The latest sell-off began last night in the US when the Federal Reserve's
announcement of a new stimulus plan, fell flat.

The policy, named Operation Twist, will involve America's central bank
selling short-term treasuries (US government bonds) and buying more longer-term
debt to the tune of $400bn (£256bn).

The move is designed to get the US economy growing by pushing down interest
rates on everything from mortgages to business loans - in turn giving consumers
and businesses more money to spend.

But it falls short of its previous stimulus attempts, so-called quantitative
easing, when the Fed pumped extra money into the economy by buying more
assets.

The Dow Jones Industrial Average lost 2.5% of value on the
news on Wednesday night and European markets gave a similar verdict today.


FTSE
100 1-Week Chart



The FTSE 100 opened over 2% lower then dived further on news of downgrades
for three US banks and fears for growth in China and Germany.

It closed down 246 points, or 4.67%, at 5041 - a loss of £64bn.

In Germany the DAX shed 5% of its value and France's CAC 40 lost 5.2%.

A European Central Bank study also suggested fiscal imbalances in the
eurozone risked undermining its stability and sustainability.

Miners have seen the bulk of the pain on the FTSE 100, on expectations that
demand for minerals will sink with growing evidence today that the French and
German economies are flat-lining.

Confidence appears shattered, despite the latest prediction from the
International Monetary Fund that world recession can be avoided.

At a
news conference today, president of the World Bank Robert Zoellick admitted his
forecast that there would be no new downturn was coming under
pressure.


But market disappointment over the Fed's latest intervention is not shared by
everyone.



OPERATION TWIST: THE VIEWS OF 2 EXPERTs










Speaking to Sky's business presenter Joel Hills on Jeff Randall Live, US
investment expert Dodge Dorland said: "I'm delighted the Fed did not move closer
to quantitative easing.

"It still keeps a few of the Fed's weapons ready for the future, it did not
overplay."

Phil Tyson, head of strategy at MF Global, told Sky: "A lot of what the Fed
said was priced in already... the impact on the wider economy could be more
negligible."

America's economy is continuing to suffer with sluggish growth and high
unemployment.



The move suggests Fed chairman Ben Bernanke is worried
about the outlook.



The
IMF forecasts growth of just 1.5% for America this year.


The Federal Reserve seemed to acknowledge the IMF's assessment in its
statement adding: "There are significant downside risks to the economic
situation.

Panda
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