Behind Market Turmoil, Europe Is Weakening

The Fed's emergency rate cut eased the panic in EU markets, but problems such as inflation, tight credit, and a strong euro remain
A pedestrian walks in front of a financial display screen showing the FTSE 100 on January 22, 2008 in West London Cate Gillon/Getty Images

European financial markets breathed a sigh of relief on Jan. 22 as share prices rebounded after the U.S. Federal Reserve pushed through an emergency three-quarter-point interest rate cut. The Fed's action, which followed a day of panic selling on global bourses, underscored Europe's vulnerability to a potential U.S. recession. After plunging in the morning—following a rout on Jan. 21 and early declines in Asia—Britain's FTSE-100 and France's CAC-40 ended the day up more than 2%, while Germany's DAX edged down 0.3%.

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