Six central banks cut rates by 0.5% overnight:

  • US Fed (down to 1.5%)
  • European Central Bank (to 3.75%)
  • Bank of England (to 4.5%)
  • Bank of Canada (to 2.5%)
  • Sweden’s Riksbank (to 4.25%)
  • Switzerland (to 2.5%)

China dropped rates by 0.27% to 6.93%. It was the second cut in three weeks.

But the rate cuts didn’t keep markets from tumbling again.

  • Wall Street dropped another 2.1%.
  • Japan’s Nikkei plunged 9.4%, it’s biggest single day drop in 21 years.
  • Hong Kong’s Hang Seng fell 8.17%, despite the central bank cutting rates by a full percentage point before trading began. JPMorgan is warning that Hong Kong on will slip into recession some time over the next six months.
  • China’s benchmark Shanghai composite index fell 3%.
  • Indonesia suspended trading after losses climbed past 10%.
  • Following a meager rally yesterday, France’s CAC fell again, this time by 6.3%
  • Brazil added a 3.85% loss to Tuesday’s 4.66% drop.

Did anywhere rise?

  • Norway added 0.02%.
  • Buoyed by the rate cut, Canada clawed back 2.31%.
  • After a surprise rate cut on Tuesday, Israel’s TA100 added 4.63%.

What the pundits say:

Myth busting on the way to a solution. As was the case with the 1929 crash that ushered in the Great Depression, the current financial meltdown is giving rise to myths that will influence public policy for decades to come. It is imperative that those myths be debunked before the next U.S. administration starts to make important decisions, followed by many other countries. By far the most dangerous myth is that deregulation is the root cause of the problem. — Real Clear Markets

Rate cuts will help, but only marginally. The immediate question is how much help will a rate cut bring to the frozen credit markets? The pressing goal is convincing financial institutions to lend. Today’s rate cut will help, as will the various efforts announced by the Fed in recent weeks. But the prospect of a quick turnaround in lending is dim, at least for the moment. Confidence has been shaken in the belief that loans will be repaid in a timely manner, if at all. Repairing that battered sentiment will take time, and a 1/2-point rate cut, while helpful and warranted, is only a small part of the solution. — The Capital Sepctator

Another day another rescue plan. So large and so frequent have been the efforts of the world’s financial authorities to right the ship of the global economy that you could be forgiven for wondering whether another one will really make that much difference. The crisis is now so unfathomably massive in fact, that yesterday’s announcement by the US Federal Reserve that it had come up with yet another innovative way to drop hundreds of billions of dollars’ worth of oil on the troubled waters didn’t seem to have much immediate impact on the markets. — Times of London

Barney breaks it down. Barney Frank has found another cause for the credit panic: racist Republicans. “They get to take things out on poor people,” the House Financial Services Chairman said at a Boston symposium Monday. “Let’s be honest: The fact that some of the poor people are black doesn’t hurt them either, from their standpoint.” No one thinks poor or black people are to blame for the lending mania at the root of the mess. But there is little question that it resulted, at least in part, from a push to relax lending standards so as to make it easier for poor and minority borrowers to get mortgages. — Wall Street Journal

Farewell Wall Street, hello Pudong? Seeking to profit from the U.S. credit crisis, other capitals of finance such as Shanghai, Singapore, Hong Kong, Mumbai and Dubai are bidding to usurp New York’s status as the place to go to raise money, trade stocks or get financial advice. In Shanghai, glittering skyscrapers such as the 101-storey World Financial Centre in the Pudong business district testify to the city’s ambition to become a global finance centre by 2020. Wall Street’s crisis could serve to quicken that evolution, moving financial power away from its old capitals in New York and London and shifting it to new hubs in Asia and the Middle East. — Globe and Mail

Peter Fray

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