Europe and Britain
The Fed effect is quite evident in the graph below. The euphoria that followed the U.S. rate cut on Wednesday quickly evaporated as reality set in - namely that one interest rate cut does not halt the earnings downgrades. (Both the FTSE and CAC had already closed for the day on Wednesday when the Fed made its announcement.)

The markets started 2001 pretty much where they left off in 2000. Investors continued to look across the Atlantic and take their cues from U.S. markets. Markets look to recover 2000 losses. Germany's DAX Index was down 7.54 percent for 2000, its first drop since 1994; France's CAC 40 Index slipped 0.54 percent, its first annual loss since 1995; and London's FT-SE 100 Index shed 10.21 percent, its first decline in six years.

Asia
With Japan's markets closed for most of the week, there was little time for investors to react to the news abroad. Rather, investors here were consumed by the tepid economic data of the prior week (see indicator scoreboard below) and the extended New Year's holidays, which continued on Monday. Analysts said that investors had already taken into consideration that sooner or later the Fed would cut rates, so the degree of surprise perhaps was not as large here.

Hong Kong's Hang Seng celebrated the Fed action wildly. The Fed move allowed the Hong Kong Monetary Authority to cut its base interest rate by 50 basis points to 7.5 percent (the rate acts as a benchmark for banks getting funding from the central bank). Banks' and property developers' equities especially benefited. The Hong Kong dollar is pegged to the U.S. currency and in essence follows U.S. monetary policy.

Introduction   •   Global Stock Market Indexes   •   Recap of Global Markets   •   Currencies   •  Indicator Scoreboard

The Bottom Line   •   Looking Ahead