- The Washington Times - Wednesday, October 29, 2008

Morning trading on the financial markets was tepid Wednesday ahead of an expected afternoon announcement that the Federal Reserve will cut its key leading rate target interest rate to the lowest level in years.

The Dow was up 59.26 points, or 0.65 percent, to 9,124.38, at 1:13 p.m. Broader indexes remained steady, as the Nasdaq composite index increased 13.90 points, or 0.84 percent, to 1,663.37, while the Standard & Poor’s 500 index rose 4.63 points, or 0.49 percent, to 945.14.

The Federal Open Market Committee headed by chairman Ben Bernanke was expected to announce a decision around 2:15 p.m. East Coast time in an effort to prevent a credit crisis from tipping the United States into a deep and prolonged recession.

The committee, the policy-setting arm of the U.S. central bank, has been meeting for two days.

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Financial markets were expecting a half-point cut in the federal funds target to bring the rate to 1.0 percent, matching the lows of 2003 and 2004.

Low interest rates were blamed for spurring the housing bust of the past year. But analysts say an interest rate cut is necessary to stem the current financial crisis.

“The Fed is staring this recession in the face and while the members know that a cut in rates is not going to do much, it is now all about creating confidence,” said Joel Naroff at Naroff Economic Advisors told the AFP news service.

World stocks jumped Wednesday ahead of the announcement.

In the Asia and the Pacific rim, Tokyo shares rose 7.74 percent and Hong Kong finished 0.8 percent higher. The Sydney market also rose 1.3 percent, while Mumbai was up 0.4 percent

In Europe markets soared Wednesday, with some exchanges showing gains of more than 9.0 percent. The FTSE 100 index rose 8.05 percent to 4,242.54 points while in Paris the CAC gained 9.23 percent to 3,402.57 points.

New orders for durable goods posted an unexpectedly strong showing in September — the largest gain in three months.

The Commerce Department reported Wednesday that orders for durable goods — products expected to last at least three years — increased to 0.8 percent to $207.8 billion.

The surge was lead by a demand for airplanes and autos, government data showed Wednesday.

The increase surprised many economists who had expected a decline. Orders had fallen by 5.5 percent in August, which was the biggest setback in nearly two years.

The big increase in orders for motor vehicles probably reflected the use of incentive packages by automakers trying to spur lagging demand during a generally dismal sales year. Orders for motor vehicles and parts had fallen by a sharp 8.8 percent in August.

Meanwhile, a possible General Motors Corp. takeover of Chrysler LLC would cost 25,000 to 35,000 jobs at the automakers, according to a Michigan consulting firm.

But the Anderson Economic Group of East Lansing said Wednesday the alternative of Chrysler being sold in pieces would result in many more job losses, the Associated Press (AP) reported.

A GM acquisition, with possible help from the federal government, is a likely possibility, Patrick Anderson, the firm’s CEO, said in a conference call with reporters.

“It’s a much bigger job loss and a much bigger taxpayer hit if Chrysler simply goes out of business or is dismantled,” Anderson said.

Chrysler employs about 49,000 people in the U.S. and has about 125,000 retirees and spouses.

In other automotive news, Porsche moved Wednesday to put stem volatility in Volkswagen shares by selling some options and Germany’s financial regulator announced a formal investigation into Volkswagen’s recent stratospheric stock gains, AP reported.

Porsche said it would be selling up to 5 percent of its options for common shares in the automaker causing Volkswagen’s stock to slump drastically Wednesday after several days of eye-popping gains, AP said.

The shares plunged 39.5 percent to 572 euros ($737.88) in late afternoon Frankfurt trading.

The options move comes after a weekend announcement that Porsche had bought options to increase its ownership in Volkswagen to 75 percent, building upon its previous ownership of 42.6 percent in common stock.

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