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Markets soften despite central banks’ action

The centralised banks’ plan to manage credit conditions caused Asian markets to be somewhat subdued today. Over the night the yen had fallen slightly, but recovered to a more solid level afterwards.

The initial confidence that greeted the banks’ move faltered, with oil and gold falling to $94 per barrel for US crude and white gold down $6 to $817.

Yutaka Mura, an analyst at Shinko Securities, opined that the move by the banks to stave off further credit-related problems doesn’t fundamentally improve the situation.

The co-ordinated action engaged in by the central banks of the US, UK, Canada and Europe was the first since the terrorist atrocity in 2001, and, at first, investors were heartened by it.

Anxieties soon emerged, however, as to whether the plan could actually solve the credit crunch, with worries causing exchanges from the American Dow to the Japanese Nikkei to fall.

Since its record high on 1 November the MSCI index has slumped by 8.5%, though it remains higher by 36.2% this year.

American banks have been struck by writedowns and losses related to the US sub-prime mortgage crisis resulting in general falls for the financial sector.

In Japan the Mitsubishi UFJ dropped 5% of its value, and CitiGroup’s Tokyo stocks lost 5.3%. However, the Australian Macquarie Group saw its value trimmed by just 0.2%.

An overnight rise in oil prices saw more investment in energy stocks, leading to a rise of almost 1% for both Japan’s Inpex Holdings and Australia’s Woodside Petroleum.

Bolstered bullion values also saw clibms of nearly 4% for both Newcrest Mining and Zijin Mining.

Not all gold firms had good news, though. Lihir Gold has been hit by unscheduled maintenance shutdowns, causing it to reduce its production forecast which has led to a 3.6% decline.

The chief manager of forex trading at Mitsubishi UFJ Securities, Minoru Shioiri, has said that he believes that the liqudity measures will go some way towards funding the markets.

The dollar has fallen to below 112 yen, and the euro has likewise fallen in value slightly, down to 164.70 yen.

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