Fed's $400bn deal to boost economy backfires as markets plummet and Moody's cuts credit ratings
of three major banks
The huge financial threat facing America was laid bare last night as the Federal Reserve took unprecedented emergency steps to prop up the world’s largest economy. Bosses at the Fed launched a $400billion operation to lower borrowing costs for businesses and for consumers in the U.S. - selling its shorter-term securities to buy longer-term holdings. The turmoil on both sides of the Atlantic will spark fears that the world is heading for its worst economic crisis since the collapse of Lehman Brothers three years ago. Its move came amid escalating fears over the health of the banking
With no solution in sight for Europe and new fears of a global recession, investors dumped stocks and commodities and ran to the safety of U.S. Treasurys.
Treasury yields , as a result, slipped to historic lows with the 10-year yielding 1.75 percent and the 30-year at 2.86 percent.
The dollar was also a beneficiary of a massive fear trade that sent U.S. stocks sharply lower, on the heels of steep sell-offs in equities markets around the globe.
The worst performing stock market sectors mirrored the sell-off in global commodities markets, with materials down 4.6 percent and energy stocks down 4.1 percent.
Copper, hit by concerns of a Chinese slowdown, tumbled 7 percent to a 1-year low. Gold, usually a safety play, was sold into the maelstrom as investors raised cash. The euro [EUR=X Loading... () ], broke below 1.35, a recent bottom of its range. It was trading in the 1.346 area, an eight-month low against the dollar. The dollar index [.DXY Loading... () ] was 1.4 percent higher.