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European Midday Report: Markets cautious in advance of crucial vote

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European markets traded cautiously this morning on hopes that the US bailout plan would be approved later this afternoon by the US Senate.

European markets traded cautiously this morning on hopes that the US bailout plan would be approved later this afternoon by the US Senate. By midday in London, the FTSE was 1.54 per cent up at 4,978.18, the CAC 40 in Paris was up 0.52 per cent at 4,052.98 and Frankfurt’s DAX was down 0.52 per cent at 5,817.39.

The London interbank offered rate, or Libor, that banks charge each other for overnight loans dropped 308 basis points this morning to 3.79 per cent, according to the British Bankers’ Association. Libor had surged to 6.88 per cent yesterday.

US stock-index futures fell on early trading this morning in the US, signaling a slowing of yesterday’s S&P 500 rally as investors speculated that the USD 700 billion bank- rescue plan from Congress will fail to avert a US recession.

Asian markets were more bullish – Japan’s Nikkei index ended up 1 per cent while Australia’s main index closed up 4 per cent.

The new US package is similar to the first, but includes new measures to help gain Congress’s backing.

One of the new clauses will raise the government’s guarantee on savings from USD 100,000 to USD 250,000.

To get through the Senate, the bill will require the backing by 60 of the 100 senators. However, it will then have to return to the House of Representatives on Thursday.

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