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While you were sleeping: BusinessWire overnight wrap

Wednesday 17th September 2008

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The Federal Reserve opted to hang tough this week, keeping its benchmark interest rate unchanged at 2% in the face of calls to ease borrowing costs to soothe financial market turmoil.

The Fed's Open Market Committee said the risks of deteriorating economic conditions and the potential for accelerating inflation "are both of significant concern."
The Fed said stress in the financial system has "increased significantly," suggesting it will continue to pump funds into the financial system by way of emergency lending.

Wall Street climbed back from its biggest slump in seven years on speculation a rescue may be hatched for American International Group Inc., helping the insurer rebound from its slump earlier this week. The Fed is considering extending a "loan package" to AIG, Bloomberg News reported, citing people familiar with the situation.

The Standard & Poor's 500 Index rose 1.8% to 1,213.59. The Dow Jones Industrial Average rose 1.3% to 11,059.02.

The prospects of the financial turmoil putting a brake on global economic growth helped drive the price of crude oil lower. Crude oil for October delivery fell 4.8% to $91.15 a barrel on the New York Mercantile Exchange, the lowest since February 7.

The US dollar rose against the yen and the euro as speculation swirled about a rescue for AIG and after the Fed left its target rate unchanged.

The dollar strengthened to 106.24 yen from 104.66. It rose to $1.4151 per euro, from $1.4243.

On the other end of the see-saw, US Treasuries snapped a rally that pushed 10-year yields to a five-year low as demand for the securities as a haven diminished.

The 10-year Treasury notes rose 13 basis points to 3.54% in New York.

In Europe, the Dow Jones Stoxx 600 Index fell to a three-year low after AIG's debt rating was cut by Standard & Poor's and Moody's Investors Service.

The Stoxx 600 fell 2.6% to 263.54, a three-year low.

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