European and US markets fall despite Fed cut

The Dow Jones Industrial Average had fallen by 1.6% to 11,781 at midday in the United States. Across the Atlantic, the FTSE index closed down 2.3% at 5,609. The Frankfurt-based DAX and Paris's CAC 40 bourse both slumped, falling by 4.9% and 4.25% respectively.

Markets in Asia fared better. The Nikkei average of leading Japanese stocks was up 2.%, though it closed below the psychologically important level of 13, 000 at 12,859. In Hong Kong, where interest rate moves replicate Fed decisions, the Hang Seng shot up by 10.7% to 24,090.

The International Monetary Fund said on Tuesday that Monday's bout of equity market woe justified the Fed cut.

"The volatile weakening experienced in many equity markets during the past few days has underscored the burden that the current financial market turmoil represents for the global growth outlook. Moreover, the process of restoring financial market stability will be complex and protracted," Masood Ahmed, the director of external relations at the Fund said. "The United States has been most affected by recent economic and financial developments. Thus, today's 75- basis point reduction in the federal funds rate was appropriate and helpful."