20 October 2008

Positive Signs in Credit Markets Lift Wall Street

This article is excerpted from the 20 October 2008 edition of “The New York Times”.

Signs of improvement in the credit markets brought a wave of relief to Wall Street on Monday morning, as investors sent shares higher after the open and welcomed comments from the chairman of the Federal Reserve that seemed to encourage a new government stimulus package….

After weeks of extraordinary coordinated efforts by the world’s governments and central banks, investors awoke on Monday to find — finally — signs that credit was beginning to flow more easily.

Borrowing rates among banks, a crucial gauge of fear in the credit markets, dropped the most in nine months, according to one measure. The cost that banks charge one another for three-month loans fell back to its levels in September, based on the closely watched Libor rate. The rate for overnight interbank loans

fell to the lowest level in more than four years.

It appeared that lower interest rates, enormous injections of liquidity and the unprecedented moves by world governments to take ownership stakes in large banks had eased some of the stress that had plagued the credit markets for weeks. …

The gains on Wall Street followed positive sessions on the European and Asian exchanges. Stocks in London and Paris were about 4 percent higher; stocks in Frankfurt rose about 1 percent. …