Wall St posts record points gain
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Updated
Record day: A trader claps on the floor of the New York Stock Exchange (Reuters)
There has been a massive rebound on Wall Street, with the Dow Jones Industrial Average posting a record one-day points gain after governments around the world unveiled bank rescue packages.
Investors enthusiastically embraced a US Government plan to buy ownership stakes in struggling American banks, with the Dow Jones index closing up 936 points higher, or more than 11 per cent.
The surge was the single biggest point gain on the New York Stock Exchange and erased more than two thirds of the losses suffered last week.
Investors are now hoping the comeback can be sustained as the various financial rescue measures take effect.
In Europe, markets surged up to 11 per cent after Eurozone countries announced details of their huge bank rescue plan.
Germany committed $1 trillion and France $700 billion to the bank rescue package.
That boosted confidence in the markets, with the German DAX surging 11 per cent to 5,034. Markets in France showed simliar gains.
The London stock market closed higher after the British Government sealed a deal with three of the country's biggest banks.
Taxpayers will spend $95 billion buying a 60 per cent stake in the Royal Bank of Scotland and a 40 per cent share in HBOS.
The news lifted UK shares, with the main FTSE 100 index closing up 8.3 per cent.
But shares in the three banks ended down heavily, with HBOS losing 28 per cent.
In futures trade locally the Share Price Index 200 has increased by 6.6 per cent, or 280 points, to 4,474.
The Australian dollar is higher against the US currency, buying around 69.4 US cents.
In Washington President Bush said the European moves would complement the five-point plan drawn up by the G7 group of the world's leading economies.
"We welcome the bold and specific follow up actions by European nations to pursue the G7 action plan," he said.
"And the United States is also acting, and we will continue to implement measures consistent with the G7 action plan to help banks gain access to capital, to strengthen the financial system, and to unfreeze credit markets and restore confidence in our financial system. "
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Comments (27)
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joey:
14 Oct 2008 8:35:32am
thank goodness some miracle has started to happen. To those people thinking these hard times are going to deliver them bargains such as property , don't count on it. Eventually Australias property market will bounce back because unlike America we don't have an oversupply and plus we have the ability for intrest rates to start coming down to stimulate are economy. Ride through it people.
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Sammy:
14 Oct 2008 8:56:06am
Don't count on it. Who said there was an oversupply in America? Asset prices far exceed sustainable levels, and on that basis there will be a correction coming in Australia too, if not this year, it will be soon. Then we will see just how responsible our banks have been. I suspect we will learn that our banks are not as responsible as Rudd would like us to believe.
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Spank:
14 Oct 2008 9:12:07am
Hi Sammy, they have approximately 18 million more houses then needed as well as dreadful lending practices.
You just can't compare Aus to the US. I agree with Joey but i think it's about 12 - 18 months away before we get growth again.Agree (0) Alert moderator
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Ben:
14 Oct 2008 9:24:55am
I believe the truth of the matter will be somewhere in between where you both sit. I feel that there are a lot of over inflated house pricies in the higher end ($1M plus range) that will be hit, but I'm not sure you will see a large drop in those in the lower scale ($250K-$500K) as people still need somewhere to live (this is also the area for investors looking for rentals). However, I also feel that unit and appartment prices are over priced and you may find a good deal here (I also feel that more units and appartments need to be built to help with our housing shortage issues).
This will also depend on which state or teritory you live in of course.Agree (0) Alert moderator
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chmone:
14 Oct 2008 9:25:24am
I agree. In fact, I think we are in a potentially a much worse situation than the US. Whilst not offically acknwoledged, in reality most mortgage borrowers are 'subprime' simply because the median house costs 7 times the median annual income. Only in a fantasy world can this be considered affordable.
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John O:
14 Oct 2008 9:55:16am
Australian houses are extremely over priced and cannot go anywhere but down. All prices will be effected .
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Ian:
14 Oct 2008 9:24:33am
Japan, UK, NZ do not have an oversupply of property either, yet their markets are in various stages of downwards price corrections.
Australia has one of the lowest population densities in the world. 7x median house price to median income can not be sustained here for too long!Agree (0) Alert moderator
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Jay:
14 Oct 2008 9:40:27am
Nice, another house price increase optimist....The most SIGNIFICANT contributor to house prices in the long term is the return to the 3.5 times average wage ratio. Whether this happens next year or over the next 5-10 years is anyones guess, but....it definately will happen. Undersupply issues is a kindergarden argument.
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Andreu:
14 Oct 2008 8:43:04am
So.. is this going to lead to higher petrol prices, higher interest rates, bigger payouts for CEOs?? is this going to give the CEOs a pat on the back.. well done!.. you've even got the Governments investing in your banks now!
Is this going to bring some honesty and integrity back into the Banks? Will this be the beginning of another bubble(like the one that bursted 3 weeks ago)?
I would suggest now would be a good time to start taking a Good Deep look at themselves. What happened that put the US banks into this crisis that is taking the whole world with them? What can WE do to prevent that ever to happen here?
Mind you Bankers, the general public are the ones supporting you(Lenders) and saving you (Tax payer bailouts).Agree (0) Alert moderator
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m1scha:
14 Oct 2008 8:48:03am
Taxpayers money propping up investor greed, and I don't include many of the mum and dad investors in with the greedy.
How many mums and dads will be in with the sharks circling to make an easy kill, snapping up shares at bargain prices? So how many time will governments have to bail out the private sector, before the only ones making a profit are those who got the world into this situation in the first place?
When Keating freed up the Australian dollar, it was to allow it to find its own level, with market forces dictating that level. Well the same principal applies here, if market forces make the market go bust, then tough luck for those who want to gamble with it.
The only problem then is, the ones to blame will still get away with it.Agree (0) Alert moderator
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redted:
14 Oct 2008 8:49:12am
who would have thought the answer to capitalism's problems was for the state to buy assets! Perhaps Marx was right all along.
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Oz:
14 Oct 2008 9:07:53am
Marx did quote on capitalists "Give them enough rope, they'll hang themselves" and thats exactly what happened.
However I am not convinced that this is the end. The U$ is still in financial trouble, hell just last week they replaced the U$ Debt Clock because it ran out of digits which is not the real figure of overall U$ debt.
I think its time to declare the U$ as officially not someone that people should lend to anymore, they have the worst credit history of all time amounting to over $55 Trillion in debt that they are never going to pay pack.
It may be a good time for the rest of the world to cut off economic ties with the U$, after all they are not major exporters anymore, they owe money that nobody is going to ever get back anyways. Best to cut em off and let em rot I say. It will work out for the best in the longer term for the rest of us!Agree (0) Alert moderator
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Artyk:
14 Oct 2008 9:36:09am
"I once lent a person $50, and never saw him again, so it was probably the best $50 I ever spent!"
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Garth:
14 Oct 2008 10:00:29am
I imagine that Karl Marx would simply smile and say, "I told you so." The capitalist system saved by the greatest act of socialism and corporate welfare in the history of the human race. Amazing! Yet it seems that those responsible will pretty much walk away from the mess that they created for the rest of us.
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mlad:
14 Oct 2008 8:51:18am
dead cat bounce or genuine rally, will be looking forward to finding out
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Dave:
14 Oct 2008 9:43:09am
I think we need to see 5 consecutive rallys before we can even think we are on the road to recovery.
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rio:
14 Oct 2008 9:52:43am
Just wait for the profit takers to come in today and wipe out the gains
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Not Anyone's Fault:
14 Oct 2008 8:52:25am
So much for free market capitalism. Looks like socialism did "win", after all. And imagine if all businesses that made bad decisions just got bailed out by - us.
And they reckon the youth of today don't take responsibility for their actions. Small wonder....Agree (0) Alert moderator
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JC:
14 Oct 2008 8:53:23am
The last paragraph just about sums it up for me. A lot of faith seems to be being placed in the "nationalisation" process. Something still bothers me though - there are a lot of bad loans in the international market and a lot of those from inter bank transactions. What happens to those? Are they "forgiven?" Are they wiped? Is this all just going to be a temporaray aberration? I just get the feeling that this still has a long way to run.
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Dane:
14 Oct 2008 9:13:34am
Your feeling is quite correct, so far what people have been doing is applying band aids and pain killers to treat a stab wound.
These are not long term solutions, governments dont have enough money to extend socialism enough to actually solve the issue.
Recession seems to be the only course, and its bound to happen, you inflate bubbles until they bust, thats the way free market capitalism works.Agree (0) Alert moderator
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Damir Ibrisimovic:
14 Oct 2008 9:15:27am
Without sensible regulations and legislations throughout history we would not have a market. It is time for politicians and businessmen to realise that regulate and deregulate ideologies work in cycles. Each one is defeated when it starts to hurt.
When we deregulate too much - economy fails. When we over regulate - economy fails. It is time that our leaders stop squabbling along ideological lines and start to work on sensible regulations.
Kind regards,Agree (0) Alert moderator
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Ivan:
14 Oct 2008 9:16:53am
Brings to mind something from Peter, Paul and Mary ...
"When will they ever learn? When will they ever learn!"
I ask you - did you see anything stable enough to invest into this week?
I sure-as-heck didn't. Who are these people who drove the DOW up 11% or 936 points?
They are the greedy and the foolish, and the eternal bulls: the optimists.
Optimists love to annoy everyone by saying "I see the glass half full." But at what point over the past 6 months has the glass been full, or even half full?
Realists see that the glass HAS BEEN full, but is now well and truly half-empty, and getting lower.
Stock markets typically lead the economy by 6 months as projected earnings fall. What we have is a signal of a recession - nay: a depression perhaps.
If this is still true, then these "optimists" have just set themselves up for another fall.
I've never seen a glass "half-full" empty so quickly!
Now before you charge in and knock me for six for calling a spade a spade ... consider this question:
"Have the gamblers on the NYSE confused the market with the economy?"
Their "trading" activity still represents behaviour associated with the bubble and greed mentality. They are trading a "market" and have not seen that the fundamentals of the market (world-wide - not just New York) do not support are still weakening.
They indeed have NOT learned ... yet!Agree (1) Alert moderator
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Crash:
14 Oct 2008 9:17:50am
So what did we, the taxpayers actually buy? Was it all the worthless debt the banks bought. Gee I hope we didn't pay to much for it, especially when there are some good quality stocks out there now that are undervalued because they went down with the pack. Governments are hopeless in business and now they want to be investors too. Oh well. off to work while we still can. There's more tax to pay.
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PShaw:
14 Oct 2008 9:25:49am
From the first two paragraphs alone:
"massive rebound", "record one-day points gain", "enthusiastically".
Massive rebound is an opinion, but bear in mind a drop of 20% one day requires a "surge" of 25% the next to get square.
Record one-day points gain may be a fact, but since it involves numbers, not percentages, given the oversized numbers involved, it does not mean so much.
Enthusiastically? Is the writer sure it wasn't just bau (business as usual)?
And the Aus$ is higher at 69.4 cents. A few weeks ago there was talk of parity with the US$ -- what happened to that?
Nothing like talking up the market.
If you have any cash left the mattress is the safest bet at the moment.Agree (0) Alert moderator
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Merlin 23:
14 Oct 2008 9:28:07am
What we are failing to recognise in this game of financial musical chairs is that the two chairs simply don't exist anymore and the next time the music stop someone is going to very disappointed.
It doesn't matter how long the governments keep the music going by changing the batteries, this will end in tears.
Fundamentally we all need to spend less, save more and stop thinking our credit cards are a bottomless pit of consumerism pleasure.Agree (0) Alert moderator
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ram:
14 Oct 2008 9:40:19am
During the 1930's Germany's stock market went up during the hyperinflation. You can always jack up stock prices by printing money - it just doesn't buy very much!
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jane:
14 Oct 2008 9:44:31am
Did anyone watch 4 Corners last night? It was a partial repeat of a 2007 program about subprime lending and its possible future ramifications - most of which have now come true. It will be repeated again tonight at 11.30 and there is also a transcript on the 4 Corners web sight.
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