Global stock rally proves to be short-lived
Wednesday March 25 2009
THE global stock rally sparked by the a $1 trillion US plan to help its banks resume lending proved to be short-lived as markets stalled yesterday, with shares in Dublin ending over 1pc lower and only a handful of European markets posting gains.
While the Dublin market was down overall, its banks continued to rise, with AIB and Bank of Ireland enjoying gains.
But with the US market opening lower and only flirting with positive territory for much of the session, global markets lacked direction.
National benchmark indexes fell in 10 of the 18 western European markets. The UK's FTSE 100 slid 1.2pc, led by BHP Billiton, Germany's DAX added 0.3pc and France's CAC 40 advanced less than 0.1pc.
"This rally may have some more legs," said Marc Faber, publisher of the Gloom, Boom & Doom Report.
US stocks swung between gains and losses with a rally at General Electric spurred by analyst stating it probably doesn't need more capital.
This helped offset Federal Reserve Chairman Ben S Bernanke and Treasury Secretary Timothy Geithner's request for stronger financial regulation. Bernanke and Geithner called for new powers to take over and wind down failing financial companies after the government's troubled rescue of American International Group.
"As we have seen with AIG, distress at large, interconnected, non-depository financial institutions can pose systemic risks just as distress at banks can," Geithner said in testimony to a House Financial Services Committee hearing in Washington. Bernanke said: "AIG highlights the urgent need for new resolution procedures."
Investors should sell bank stocks because the Treasury's plan won't stop profits from dropping, said Richard Bernstein, Bank of America's chief US quantitative strategist who is leaving the bank in mid-April to start his own money management firm. Analysts project that profit at financial companies in the S&P 500 will decline 33pc this quarter and 34pc in the next, according to estimates compiled by Bloomberg.
- Pat Boyle
