Effect of US subprime crisis could be diluted: analysts
The European Central Bank pumped 155.85 billion euros (212.98 billion dollars) into the eurozone banking market on Thursday and Friday as central banks across the globe rushed to ward off a global credit crunch linked to the US subprime loan market.
A crunch would make it harder and more expensive for businesses and consumers to get loans and cash.
The potential for instability to spread fast when markets re-open on Monday is high, analysts agreed, but most thought the main bourses would weather the storm.
Gilles Moec, senior economist at Bank of America, said: "One of the big issues is that no-one has any real clue of the amount of subprime loans which have been purchased by foreigners.
"The big question is what is the overall amount and this is bad for the markets because if there is one thing that the markets hate, it is uncertainty."
He said however that there was a paradox -- although there was negative market sentiment, the risk appeared to be spread around the world.
"This shows that the risk is not concentrated in any one place and this is a good thing for the market," Moec said.
Subprime loans are offered at high interest rates to Americans who have a poor credit rating and might otherwise be denied credit.
Andreas Huerkamp, a Commerzbank analyst, predicted the crisis would blow over.
"There are strong parallels with the crisis in the mid-90s so you have to be a brave investor to buy shares at the moment," he said.
"But history shows that everything will be forgotten in six months and the market will recover."
The US Federal Reserve and Japanese central bank had made similar interventions to ensure that the markets continued to function normally, with the Fed injecting 62 billion dollars into the market.
The Frankfurt-based European Central Bank, the guardian of the euro, said its decision to pump money into the market was a "fine tuning" operation.
The "fine tuning" on Thursday had involved injecting 94.8 billion euros, more than the bank had released after the September 11, 2001, attacks on the United States.
The cash injections enable commercial banks to borrow from the central bank to satisfy their liquidity needs.
Howard Archer, chief UK and European economist at Global Insight in London, said that if the central banks did their job, the markets should stabilise.
"As long as the central banks succeed in calming markets down, the chances are that the impact of financial market volatility on the real economies should be small," he said.
"Importantly, the underlying fundamentals for the UK and Eurozone economies are still pretty good, so hopefully this will help to limit the overall economic fallout."