Translated material
World government
Leading powers have begun a concerted fight against the financial crisis
Global financial authorities have finally joined forces to combat the financial crisis . Yesterday, almost simultaneously, the central banks of most leading economic powers lowered interest rates in order to make loans cheaper for companies and consumers. However, these actions have not yet reassured investors. Moreover, global stock indices continued to decline . The Russian market was unable to react to the latest events - by that time the Federal Service for Financial Markets (FSFM) had closed the stock exchanges until October 10, as Russian stocks collapsed again in the morning.Economists call the actions of regulators correct, but in the current situation, lowering rates and saturating markets with money does not solve the main problem - the mutual distrust of all participants in the global financial sector towards each other remains, which means that there can be no talk of exiting the crisis.
The need to reduce interest rates has been long overdue. “This is an absolutely right decision,” says Alexey Moiseev, head of the analytical department of Renaissance Capital Investment Company. - If it had been adopted two weeks ago, perhaps the markets would not have experienced such significant problems now. But the main thing is that the decision has been made. It’s time to admit the obvious - the United States is no longer a global financial center, so the problem of the global financial crisis must be solved through joint efforts.”
Yesterday afternoon, the US Federal Reserve lowered the interbank lending rate by 0.5 percentage points. The European Central Bank, the Banks of Sweden, England, Canada, and Switzerland did the same. The Bank of China also cut rates by 0.27 percentage points and the Hong Kong Monetary Administration by 1 percentage point. As the central banks said in a joint statement, “the recent worsening of the financial crisis has increased the risks of weakening economic growth and therefore reduced risks to price stability. Some easing of monetary policy is therefore warranted.”
During the current crisis, global regulators have united their efforts, in fact, only once, back in the fall of last year, carrying out massive interventions to maintain liquidity. However, then the actions had only a short-term effect. It is possible that the current measures will not be a panacea. Still, German Chancellor Angela Merkel called the move “landmark” for strengthening the economy and said she was confident it would help “restore confidence” in markets. “This decision will help stabilize the situation in the financial markets. In light of the extraordinary excitement that we have seen in recent days, this step was the right one,” said German Economics Minister Michael Glos.
The decisions of central banks yesterday failed to stop a new wave of stock sales. At first, however, stock indices rose slightly in the United States, the fall slowed down in Europe, but by evening it became clear that there would be no market reversal. By the time the newspaper went to press, the American indices Dow Jones and Nasdaq had fallen by 1.45 and 0.32%, respectively. European CAC and FTSE lost more than 6% at the end of the day.
“On the one hand, these measures are really necessary; formally they will lead to cheaper loans,” says Yaroslav Lisovolik, chief economist at Deutsche Bank. - On the other hand, the main problem is not that there is no money, but that banks do not lend to each other. That is, the refinancing mechanism does not work due to the lack of trust of market participants in each other. And I think that the current quantitative saturation of the banking system with money will not lead to a qualitative change in confidence in the market.”
“Obviously, the next measure will be the purchase of bad debts by the state from banks,” says Alexey Moiseev from Renaissance Capital Investment Company. “For now, it is clear that the crisis will continue.” As stated in the analytical report of the investment company BCS, “it is difficult to hope for a long-term positive impact of this measure. This was done mainly to ease the crisis of confidence in the interbank market. Most likely the effect will only be temporary. Unfortunately, it is impossible to say that the bottom has already been passed. Moreover, the situation only continues to worsen - stocks are becoming cheaper, no one is interested in fundamental analysis anymore, and panic reigns in world markets. I’m glad that all financial authorities are trying to help.”
Yesterday it became known that as part of emergency assistance, the Bank of England will provide British banks with a total of 200 billion pounds sterling. Banks will be able to receive these funds in exchange for the state's equity participation in their share capital.
Asian stock exchanges, which had closed even before the central banks' decision to cut rates, continued to not only fall, but literally collapse. The MSCI Asia Pacific region composite index fell 7.3% to 91.54 points. Japan's Nikkei 225 Average lost 9.4% on the day, ending trading with its steepest decline since October 1987. Hong Kong's Hang Seng fell 7.6% after regulators cut the benchmark rate from 3.5 to 2.5% in an attempt to curb the worsening crisis. Australia's S&P/ASX 200 index fell 5% after it was announced that the rate of decline in consumer confidence in September was the fastest in two years. Trading in Indonesia was closed after the index collapsed by 10%. “This is surrender. No one can say when we will reach the bottom. If you buy assets today, you could lose another 10% tomorrow,” said a fund manager at BlackRock Inc. Masafumi Oshiden.
Another collapse occurred in the Russian market. The trading lasted only half an hour, after which the Federal Financial Markets Service suspended it until further notice. By that time, the indices had collapsed to the levels of early summer 2005, the RTS index fell by 11.25%, to 761.63 points, the MICEX index by 14.35%, to 637.87 points. The oil and gas and banking sectors depreciated the most. Sberbank shares lost 17.8%, VTB - 13.3%, Gazprom - 16.4%, Rosneft - 14.8%, Surgutneftegaz - 15.5%. As an additional reason to sell securities, investors used information about the next drop in oil prices. Analysts predict a drop in fuel consumption in developed countries by 3-4% due to the economic crisis. During the day, the capitalization of the Russian stock market decreased by 8.49%, to $487 billion.