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G7 pledges urgent, decisive action as markets reel
11 Oct 2008, 0416 hrs IST,
REUTERS
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WASHINGTON/NEW
YORK: Finance chiefs of the world's major economies pledged on Friday to take
decisive action and work together to stem the escalating financial crisis after
another day of gut-wrenching drops on world
markets.
Reeling from the loss
of trillions of dollars of wealth, investors worldwide had pinned their hopes on
decisive action from the Group of Seven major industrialized nations. US stocks
pared massive losses in a late
recovery.
After markets closed,
the Group of Seven major industrialized nations said the situation called for
"urgent and exceptional action," and pledged to take all necessary steps to
unfreeze credit and money
markets.
They said that would
include using all tools to prevent systemically important institutions from
failure and ensuring that banks can raise capital from public and private
sources.
Concerted
interest-rate cuts by major central banks around the world, individual liquidity
injections, a $700 billion U.S. bailout plan, and government plans in Europe to
take equity stakes in banks have so far failed to restore investor
confidence.
"It all
depends on whether the governments can get a grip on this," said Axel Merk,
portfolio manager at Merk Hard Currency Fund in Palo Alto,
California.
Investors, leading
nations and the International Monetary Fund had all clamored for a united front
as nose-diving share prices suspended trade on bourses from Indonesia to Austria
and emerging market currencies
crumbled.
US stocks crawled
back in the final hour of trade with the Dow trimming losses to 1.5 percent on a
day in which it traded in a 1,000-point range. The eighth straight day of losses
left the Dow down 18 percent for the week.
US stocks have lost $2.4
trillion this week and $8.4 trillion in the past year, according to the Dow
Jones Wilshire 5000.
The rally
only partially resurrected the shares of Morgan Stanley and Goldman Sachs,
pummeled when credit rating agency Moody's Investors Service said it might cut
their ratings, reviving concerns about the viability of their banking
models.
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