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. Last Updated: 07/27/2016

U.S. Rate Rise Brings Markets Down

LONDON -- Stock markets around the world came down with a bump on Monday in response to the rise in U.S. interest rates.


Traders said the impact might have ended near-term hopes of a cut in German rates, seen as the key to European recovery.


The U.S. Federal Reserve raised Fed fund rates by a quarter of a percentage point on Friday -- their first rise in five years -- and the Dow Jones industrial index responded by losing 96 points, with a knock-on effect felt around the globe.


But when Wall Street opened Monday the Dow hovered around its Friday closing figure in early trading, regaining more than eight points to 3,880.


This helped calm fears that Friday's move had heralded the start of a major meltdown like those of 1987 and 1962, when share markets lost more than a quarter of their value in just days.


Asia and Australasia were first to feel the impact of Friday's U.S. move, with Tokyo losing 1.41 percent, most other major exchanges retreating by 2-3 percent and Hong Kong seeing more than 6 percent lopped off share values.


Local factors were also responsible.


Tokyo's Nikkei average closed at 20,014.40, down 287.03 points, but brokers said investors were waiting for an economic stimulus package that was due to be announced Tuesday.


Hong Kong's Hang Seng index plunged 743.30 points to 11,414.27. But traders blamed local and international jitters after news that Japan's Nomura brokerage was discarding Hong Kong from its Asian index.


Europe was next to suffer, with London, Frankfurt and Paris losing 2-3 percent and most minor exchanges more.


Among the major exchanges, London's Financial Times-Stock Exchange index was more than 100 points down before the official opening and spent much of the day some 80 points off, just below 3,400 points.


But after the steady opening in New York, the FTSE soon added some 20 points, reaching 3,419 and appearing to have stabilized.


In Paris, the CAC-40 followed suit, losing as much as 70 points but regaining 35 of them in afternoon trading.


The New York opening came after Frankfurt's DAX had closed, leaving the German index down 58.85 points on the day at 2,079.40.


On money markets, the dollar's buoyancy survived market jitters about central bank dollar sales, but the currency failed to extend its rally on Friday's U.S. policy tightening.


Traders said U.S. players had taken the dollar up to test the day's highs around 1.7640 marks, and the U.S. stock market's start on a firmer footing than expected had also lent support.