Quick Announce

Ailing world Finance markets are aiming to claw back more of the losses caused by fears of a credit crunch but investors start the week fearing more volatile trading. Economists are increasingly dismissing the possibility that problems in the US housing market will cause a recession but they say that there is still a bumpy ride ahead. Most of the major markets hit a low point in mid-August, between 10 and 15 percent below their highs for the year. But Wall Street and stock markets in Europe and Asia have since regained about half of the lost ground.

“We do expect volatility to persist for a little longer yet; however, recent intervention by the authorities increases the probability that we avoid a severe 1998-type correction,” said
Graham Secker, a markets analyst for Morgan Stanley UK.

Shares lost about 30 percent in three months after a financial crisis in Russia in 1998.

This time, investors have been reassured by the sound economic figures coming out of North America and the major European economies and by the determination expressed by US Federal Reserve chairman Ben Bernanke.

Bernanke insisted on Friday that the US central bank was ready to act “as needed to provide liquidity and promote the orderly functioning of markets,” addressing fears of a credit crunch.

Central banks have implemented a range of measures in recent weeks to ensure commercial banks have adequate liquidity to continue normal lending practices.

There were fears that losses by banks caused by bad investments in risky US subprime loans would lead to sharp increases in lending rates, penalising companies and investors.

Banks invested in subprime loans through mortgage-backed securities, complicated financial instruments that have plummeted in value as increasing numbers of stretched US borrowers default on their home loans.