The U. S. stock market staged a dramatic late day rally Wednesday, amid optimism that declining interest rates may keep the economy from a prolonged downturn.
U.S. stocks fell sharply as trading began but then recovered to post strong gains. Share prices rose two percent or more in some Asian markets and Hong Kong's key index soared nearly 11 percent.
But some major European stock indexes were down by more than four percent.
Tuesday, the U.S. Federal Reserve (central bank) cut the key interest rate by three-quarters of one percent, after worries about a slowing U.S. economy caused world stock prices to plunge. Many investors and economists say the Federal Reserve may make further rate cuts next week.
Officials of the International Monetary Fund said the U.S. rate cut was appropriate, but that there may still be a slowdown in world economic growth this year.
The U. S. Congressional Budget Office, in a report Wednesday, said it does not expect a recession this year, and said the economy should begin to turn around in 2009. But it said the deficit for 2008 is expected to climb to 250 billion dollars.
The Bush administration is negotiating with U.S. lawmakers on a proposed 145 billion-dollar package of measures intended to stimulate the economy.