11:00PM Frankfurt, 5:00PM New York, 9:00AM next day Sydney

The Federal Reserve cut the interest rates by 75 basis points to 3.5%, largest cut in more than two decades. The surprise cut in an emergency session helped market to avert near collapse of 5% as other markets around the world witnessed in last two days of trading.

The Fed appears to be behind the curve in catching up with the need of the economy. While the Fed has taken an aggressive move with lowering of interest rate, future rate cuts are likely to have less impact on the economic growth. Low interest rates are only going to make dollar vulnerable against euro, pound, yen, and other Asian currencies. Financial markets recovered from their worst losses in the day, but fear of economic recession and talks of emerging weakness in job markets dominated trading desks.

Sentiments and rational behavior appear to rule market trading today. Lack of clear direction from the administration also contributed to the nervousness in the market. Investors are looking for more than monetary stimulus and are now looking for additional rate cuts in the next two months.

Sentimental markets appear to be in the grip of fear as major indexes in Asia are now trading between two and five-year lows. Nikkei 225 in Japan is now near 27-month low. Export sensitive stocks in Japan are reaching recent lows with Toyota Motor, Honda, Nissan, Sony, and Cannon, down between 15% and 30% from their recent peaks. Banks, brokerage companies and shipping companies have been the hardest in this on-going sell-off. Construction slowdown after the new building code has also hurt real estate companies.

Hong Kong fell 8.7% today after losing 5.5% on Monday. Banks, insurance, and properties companies were leading decliners. Bank of China is likely to report a larger than estimated loss related to sub-prime market. The surprise estimate of subprime related loss from Societe General, which has still not been reported, hurt the sentiment in China and Hong Kong. HSBC has been on the decline in Hong Kong trading on the worries that the bank may not have a handle on the depth of its sub-prime losses. Ping An Insurance fell 12% after it carried out a bond offering to accumulate capital and hunt for asset acquisition.

India has witnessed one of the worst two-day sell-off. The lack of liquidity and international investors selling in the global sell-off has created dramatic swings in the market. Sensex index dropped 5% after losing 7.5% on Monday. The market was halted after one minute of opening and fell quickly 12% in the morning trading before recovering to close down only 5%. The Reliance Power IPO has sucked capital from five million retail investors. Banks, auto companies, steelmakers, and brokerage companies traded sharply lower.

European markets in the late afternoon are trading lower as well and Germany has led the decline in the region. Germany fell another 5% at the opening. European markets regained most of the losses after the Federal Reserve cut the rate by 75 basis points to 3.5% but markets have remained on the edge.

North American Markets indexes

Dow Jones Industrial Average lost 128.11 or 1.06% to a close of 11,971.19, S&P 500 closed down 14.69 or 1.11% to 1,310.50, and Nasdaq Composite Index traded down 47.75 or 2.04% to a close of 2,292.27.

In Toronto TSX Composite closed up 508.76 or 4.19% to close at 12,640.89.

Of the 30 stocks in Dow Jones Industrial Average, 8 closed higher, 22 closed lower, and none was unchanged.

Home Depot led the gainers in the index with a rise of 7.3% followed by increases in Wal-Mart of 3.4%, in JP Morgan of 3.2%, in Caterpillar of 1.6%, and in AIG of 0.7%.

Merck led the decliners in the index with a fall of 3.7% followed by losses in Verizon of 3.22%, in Coca Cola of 3.2%, in Exxon Mobil of 3.1%, and in Microsoft of 3%.

Of the stocks in S&P 500, 194 closed higher, 303 fell, and 3 were unchanged.

One hundred and six stocks fell more than 3% and eighty seven stocks rose more than 3%.

Waters Corp led the decliners in the index with a fall of 20% followed by losses in precision Cast of 7.8%, in Motorola of 7.6%, in Sigma Aldrich of 6.7%, and in Bristol Meyers of 6.5%.

MBIA soared 46% and led the gainers in the index followed by increases in Ambac of 29%, in circuit City of 21%, in MGIC of 13.75%, and in Keycorp of 12.6%. Other retailers including Sears, Dillards, Coach, Lowe’s, RadioShack, Nordstrom, and Family Dollar rallied more than 8%.

South American Markets Indexes

In Latin Markets Mexico led the gainers in the region with a rise of 6.36% followed by increases in Colombia of 5.18%, in Chile of 4.93%, in Peru of 4.77%, and in Brazil of 4.45%.