Rumours of emergency US rate cut sweep market

Rumours of an emergency US rate cut have swept the market as worries about the financial sector sent shares lower.

Traders heard talk the US Federal Reserve may cut the cost of borrowing from the current 2%. The Fed is due to meet anyway next week, but in the wake of Lehman Brothers' problems, and febrile rumours of other banks such as Merrill Lynch suffering, a quick rate cut was on dealers' minds.

The suggestion has pulled markets back from their worst levels. The Dow Jones Industrial Average is now down around 50 points, after it was 110 points lower at one stage, while the FTSE 100, which touched 5262 after Wall Street opened, has recovered to 5327.2, up 39 points.

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