US and European governments as well as major central banks launched an exceptional joint effort to battle the global financial crisis on Wednesday, simultaneously slashing interest rates on three continents to bolster battered markets. The European Central Bank, Bank of England, US Federal Reserve and peers in Canada, Sweden and Switzerland made deep and concerted cuts of a half percentage point to send their strongest signal of support since just after the September 11 terror attacks. In an attempt to stem unprecedented global market turmoil, the Fed cut its key federal funds lending rate by half a percentage point to 1.5 percent and lowered its discount rate by the same amount to 1.75 percent. The ECB also cut by a half-point to 3.75 percent as did the Bank of England, taking its rate to 4.5 percent. In Toronto, the Bank of Canada unexpectedly cut its key interest rate by 50 basis points to 2.50 percent on Wednesday. The bank said the intensification of the global financial crisis was impacting all countries and that conditions in global financial markets have worsened considerably. “In recent weeks conditions in global financial markets have deteriorated sharply, the US economy has weakened further, and commodity prices have fallen abruptly,” the Bank of Canada said in a statement. China also cut its key rate 27 basis points and its reserve requirements for banks by half a percentage point. The central bank said it would lower its main interest rate on one-year loans, its second cut since Sept. 15 as it too look to safeguard its economy from the storm. The Bank of Japan, with rates at just 0.5 percent, did not ease but the Fed said the BOJ expressed its strong support for the coordinated policy action. Kuwait central bank has also cut the discount rate by 1.25 percent to 4.5 percent to increase liquidity and boost confidence in the falling stock market The Kuwait News Agency report quotes the central bank governor Sheik Salem Abdul-Aziz Al-Sabah as saying the rate cut will go into effect Wednesday. The Kuwaiti market has been declining in response to the world financial crisis, plunging 3.59 percent Sunday in its worst day this week. There have been calls to temporarily halt trading and for government intervention to cut losses. The European Central Bank, the Bank of England and the Swiss National Bank offered another $90 billion in overnight money to the financial sector Wednesday. The ECB offered up $70 billion, while the BoE and the SNB both offered $10 billion. The ECB said it got bids for more than $122 billion from 69 bidders. The marginal interest rate on the money was 9.5 percent. The BoE said it received bids for $8.56 billion on its offer, which allowed for a maximum of 10 bidders. The BoE said the weighted average accepted rate on the money was 3.59 percent. The SNB said it got bids for $14.4 billion from 18 bidders on its offer. The weighted average interest rate on the money was 3.4 percent. The three European banks have steadily offered money to the financial sector over recent weeks in an effort to prop up lending between banks. “Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets,” the European and North American banks said in a joint statement. British officials announced an $87 billion (64-billion euro) part-nationalization of the country's main banks as part of an emergency bailout package worth hundreds of billions of dollars. The government said it would use 50 billion pounds (64 billion euros, $87 billion) of taxpayers' money to buy preferential shares in the banks, giving them fresh capital in a bid to prevent a collapse of the banking system. The three-part package also makes available 200 billion pounds in short-term loans and the government will use another 250 billion pounds to guarantee loans between banks. On Tuesday, the US Federal Reserve had opened its coffers further, offering to buy short-term debt or commercial paper, which is critical for many corporate operations. The move was designed to provide a new liquidity backstop for corporate finance and was established “to prevent substantial disruptions to the financial markets and the economy,” the Fed said. Central banks have been pumping huge amounts of dollars, euros, pounds and yen into interbank credit markets to ensure that another critical pillar of the global economy does not collapse. US and European governments sought to contain the deepening world financial crisis on Wednesday, with Britain stepping in to help its hard-pressed banks and Russia shutting down its biggest stock market for two days. But the greatest relief to markets came from a coordinated rate cut from leading world central banks. European shares were down only slightly by midday on Wednesday after a dramatic coordinated rate cut by the world's top central banks lifted stocks from five-year lows hit early in the day. The British FTSE was slightly down 2.5 percent, the Frankfurt DAX 30 blue-chip index was down 3.1 percent and the Paris CAC-40 was off 2.6 percent. All had been deeper in the red before the coordinated rate cut. Oil tumbles below $88 In New York, oil prices fell on Wednesday as concerns about the impact of the global financial crisis on demand and rising US inventories outweighed a move by central banks to cut interest rates. US crude fell $2.36 to $87.70 a barrel by 1:35 P.M. EDT (1735 GMT), after hitting a fresh 10-month low earlier. London Brent crude fell by $1.70 to $82.96 a barrel. US crude stocks rose 8.1 million barrels as inventories recovered from storm disruptions, according to the US Energy Information Administration's weekly report. The EIA also said gasoline stocks soared by 7.2 million barrels to 186.8 million barrels, well above the 2 million barrel increase analysts had expected. __
