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Tokyo Exchange meets coldly US discount rate reduction

The Tokyo Stock Exchange has responded in a most reserved manner to the reduction of the discount rate in the US.

The Nikkei index, which reflects the value of shares of 225 biggest companies, went up by about 2%, or 256.01 points, to reach 12,829.06, as a result of a trading session. The growth does not look impressive, considering the fact that on Tuesday the Nikkei index, the indicator of Japan’s economic well-being, dropped by 5.65%, or 752.89 points, down to 12,573.05. This is the lowest level since September 2005. The decision of the US Federal Reserve to reduce the discount rate by 0.75 percentage point, down to 3.5%, which was made on Tuesday night, triggered a dramatic growth of the Nikkei index in Tokyo. During the first 15 minutes of the trading session it grew by 3.5% to reach 430.56 points, but by midday that increment of the market value was almost reduced to naught. At some moments the growth rate of the Nikkei index was only 0.5% (66 points), which was followed by another rise. It is obvious that such dramatic fluctuations of quotations show that investors are not sure that the growing financial crisis, brought about by problems with mortgage crediting in the United States, will be overcome.

It is equally obvious that the situation on the stock markets of Tokyo and other Asian countries will depend on the results of the trading session at the New York Stock Exchange, which did not have time to respond on Tuesday to measures for stimulating the economy. On Tuesday the Dow Jones index dropped to the lowest level since March 2007 after the publication of a report on the profits of Bank of America Corp., the second biggest American bank. It was reduced by 95% in the last quarter of 2007 in comparison with a similar period of 2006. This provoked a chain reaction at other stock exchanges of the world, including Russia. The panic ended, and the growth began again only in the evening, after a report came about the reduction of the discount rate by the Federal Reserve , but the time was not enough for compensating for the losses. (ITAR-TASS)